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Is emission intensity or output U-shaped in the strictness of environmental policy?

Dijkstra, Bouwe R.; Gil-Moltó, Maria J.

Authors

Maria J. Gil-Moltó m.j.gil-molto@sheffield.ac.uk



Abstract

We show that, in a range of market conditions, an ever stricter environmental policy does not always lead to ever cleaner production methods and ever lower production of polluting goods. We consider an integrated technology, where firms can reduce their emission intensities in a continuous fashion. Analogous to the previous literature we find that firms' emission intensities can be U-shaped in the strictness of policy, but we show that this applies only under low profitability conditions. Under high profitability conditions, output levels are U-shaped in the strictness of the policy. The latter result is new in the literature. In the case where the U-shape arises in emission intensities, the minimum is reached where the marginal abatement cost curves intersect.

Journal Article Type Article
Journal Journal of Public Economic Theory
Print ISSN 1097-3923
Electronic ISSN 1467-9779
Publisher Wiley
Peer Reviewed Peer Reviewed
APA6 Citation Dijkstra, B. R., & Gil-Moltó, M. J. (in press). Is emission intensity or output U-shaped in the strictness of environmental policy?. Journal of Public Economic Theory, https://doi.org/10.1111/jpet.12277
DOI https://doi.org/10.1111/jpet.12277
Keywords Abatement; Environmental taxation; Oligopoly; Marginal abatement costs
Publisher URL http://onlinelibrary.wi...AFFD646983D0CCD.f02t03? +
Copyright Statement Copyright information regarding this work can be found at the following address: http://eprints.nottingh.../end_user_agreement.pdf
Additional Information This is the pre-peer reviewed version of the following article: Dijkstra BR, Gil-Moltó MJ. Is emission intensity or output U-shaped in the strictness of environmental policy? Journal of Public Economic Theory. 2017; 00:1–25. https://doi.org/10.1111/jpet.12277, which has been published in final form at http://onlinelibrary.wi...AFFD646983D0CCD.f02t03? This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Self-Archiving.

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Copyright Statement
Copyright information regarding this work can be found at the following address: http://eprints.nottingham.ac.uk/end_user_agreement.pdf





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