About polluting eco-industries: optimal provision of abatement goods and Pigouvian fees

Abstract : In this article, the authors introduce a polluting eco-industry. Depending on the level of damage, there are two optimal equilibria. If the damage is low, one generalizes the usual results of the economic literature to the polluting eco-industry: the dirty firm partially abates their emissions, only efficient eco-industry firms produce and the abatement level increases with the damage. However, very specific results are obtained if the damage is high. In this case, not all efficient eco-industry firms produce. The abatement level and the number of active eco-industry firms both decrease as the damage increases. The authors finally show that a well-designed Pigouvian tax implements these equilibria in a competitive economy.
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Submitted on : Friday, January 12, 2018 - 2:01:47 PM
Last modification on : Monday, March 4, 2019 - 2:04:14 PM

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Damien Sans, Sonia Schwartz, Hubert Stahn. About polluting eco-industries: optimal provision of abatement goods and Pigouvian fees. Handbook of Environmental Economics, Elsevier, 2017, 8 (3), pp.46 - 61. ⟨10.21511/ee.08(3).2017.05⟩. ⟨hal-01682684⟩

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