The effect of emission taxes and abatement subsidies on market structure: Comment

Environmental Regulations and Economic Activity: Influence on Market Structure

“…For the case of a dominant firm with a competitive fringe, the authors show that an increase in the emission tax reduces the number of firms if the elasticity of the residual demand curve is high and/or the marginal cost curve of the competitive firms is steep. In a comment on Conrad & Wang (1993), Kohn (1997) argues that if there are sufficient economies of scale in the abatement technology, the optimal scale and output of polluting firms may increase with emission tax and in such situations, the imposition of a (Pigouvian) emission tax is more likely to reduce the number of firms (even if the demand curve for the final product is sufficiently inelastic).…”

Environmental Abatement Costs and Establishment Size

“…A more subtle effect of regulation receiving only a modest amount of empirical study is the impact of such regulation on industry structure and, in particular, firm or plant size. Conrad and Wang (1993) and the subsequent comment by Kohn (1997) analyze this issue theoretically. Becker andHenderson (1999, 2000), Dean et al (2000), and Ollinger and Fernandez-Cornejo (1998), analyzing data from the United States, and Golombek and Raknerud (1997), using Norwegian data, are the most recent additions to the empirical literature.…”

“…Brock andEvans (1985, 1986) argue that because pollution control is capital-intensive and typically involves high fixed costs, optimal plant size increases with regulatory intensity. Kohn (1997) shows that the effect of emission taxes depends crucially on the assumption about the returns to scale in abatement technology; increasing returns may lead to an increase in the scale of polluting firms. Empirically, Becker andHenderson (1999, 2000) find that new firms in ozone-intensive industries (industrial organic chemicals, miscellaneous plastic products, and wood furniture) begin initially larger in counties in nonattainment of the U.S. Clean Air Act's ozone requirements but invest less in the future.…”

Tax Uniformity: A Commitment Device for Restraining Opportunistic Behavior

“…Those models are mainly concerned with a comparison between emission taxes and standards in oligopoly (see, for instance, Van Long and Soubeyran , Lahiri and Ono ) and do not compare uniform and differentiated emission taxes. Other papers have discussed the effects of environmental policy on market structure (see, for instance, Conrad and Wang , Kohn ).…”