Optimal overall emissions taxation in durable goods oligopoly

We analyze optimal second-best emission taxes in a durable good industry under imperfect competition. The analysis is performed for three different types of emissions and for situations where the good is rented, sold or simultaneously sold and rented. We show, for durable goods that may cause pollution in a period (or in periods) different from the production period, that the expected overall emission tax and the expected total marginal environmental damage per unit produced in each period are the relevant variables to consider in the analysis of overinternalization and in the comparison of optimal emission taxes for renting, selling and renting-selling firms. Our results allow to extend some previous results in the literature to these durable goods and provide an adequate perspective on some other results (in particular, we point out the limitations of focusing only, for those durable goods, on the level and effects of the optimal emission tax in the production period).

Local air pollution and global climate change taxes: a distributional analysis

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Incentive based policies on climate change: taxes and tradable emssions permits

The reduction of Greenhouse Gases (GHG) plays a central role in the environmental policies considered by countries for implementation not only at its own level but also at supranational levels. This thesis is dedicated to investigate some aspects of two of the most relevant climate change policies. The first part is dedicated to emission permit markets and the second part to optimal carbon taxes. On emission permit markets we explore the strategic behavior of oligopolistic firms operating in polluting industrial sectors that are regulated by cap and trade systems. Our aim is to identify how market power influences the main results obtained under perfect competition assumptions and to understand how actions taken in one market affects the outcome of the other related market. A partial equilibrium model is developed for this purpose with specific abatement cost functions. In Chapter 2 we use the model to explain some of the most relevant literature results. In Chapter 3 the model is used to analyze different oligopolistic structures in the product market under the assumption of competitive permits market. There are two significant findings. Firstly, under the assumption of a Stackelberg oligopoly, firms have no incentives for lobbying in order to manipulate permit prices up, as they have under Cournot competition...

Tax-Based Fisheries Management: The Case Study Of The Cantabrian Anchovy Fishery

A dynamic optimisation framework is adopted to show how tax-based management systems theoretically correct the inefficient allocation of fishing resources derived from the stock externality. Optimal Pigouvian taxes on output (τ) and on inputs (γ) are calculated, compared and considered as potential alternatives to the current regulation of VIII division Cantabrian anchovy fishery. The sensibility analysis of optimal taxes illustrates an asymmetry between (τ) and (γ) when cost price ratio varies. The distributional effects also differ. Special attention will be paid to the real implementation of the tax-based systems in fisheries.

Policy-induced technology adoption: Evidence from the U.S. lead phasedown

Theory suggests that economic instruments, such as pollution taxes or tradable permits, can provide more efficient technology adoption incentives than conventional regulatory standards. We explore this issue for an important industry undergoing dramatic decreases in allowed pollution - the U.S. petroleum industry's phasedown of lead in gasoline. Using a duration model applied to a panel of refineries from 1971-1995, we find that the pattern of technology adoption is consistent with an economic response to market incentives, plant characteristics, and alternative policies. Importantly, evidence suggests that the tradable permit system used during the phasedown provided incentives for more efficient technology adoption decisions.

Essais sur des questions internationales en économie de l'environnement

Cette thèse est constituée de trois articles. Le premier étudie le problème de pollution globale dans un contexte environnemental incertain. Le deuxième article traite des accords internationaux sur l'environnement. Le troisième article montre comment la libéralisation du commerce peut affecter le bien-être et les taxes sur la pollution dans un monde où les pays sont hétérogènes et la pollution transfrontalière. Dans le premier article, je considère un monde dans lequel les pays souffrent uniformément de la pollution globale. Ils font face à une menace continuelle de voir les dommages causés par cette pollution globale s'accroître subitement de façon irréversible. Je caractérise le niveau des émissions, le stock de pollution, et le niveau de bien-être actualisé en équilibres coopératif et non-coopératif. L'objectif visé est d'analyser l'impact de ce type d'incertitude sur les équilibres issus des comportements stratégiques des pays. Je trouve que cette incertitude peut avoir un effet significatif sur ces équilibres. Les pays réduisent leurs émissions pour atténuer leur exposition à cette menace. Plus la menace est grande, plus les pays ajustent leurs émissions afin de réduire le stock de pollution globale. Cependant, en dépit du fait que cette incertitude diminue le bien-être net initial, elle peut à long terme avoir un effet net positif sur le bien-être. Le deuxième article étend la classe des modèles dynamiques standards traitant des accords internationaux sur l'environnement au cas où la durée de la période d'engagement à de tels accords est un paramètre que l'on peut varier de façon exogène. Nous y étudions les évolutions dans le temps de la taille des coalitions stables, du stock de pollution et du taux d'émissions en fonction de la durée d'engagement. Nous montrons que la longueur de la période d'engagement a un effet très significatif sur l'équilibre. Trois intervalles de durée d'engagement sont identifiés pour lesquels l'équilibre et sa dynamique diffèrent considérablement. Alors que pour des durées de la période d'engagement très longues on observe des coalitions stables constituées d'un petit nombre de pays, si ces durées sont suffisamment courtes on peut observer un niveau de coopération élevé. Les durées d'engagement entre ces deux extrêmes sont caractérisées par une relation inverse entre la durée de la période d'engagement et la taille des coalitions stables. Ces faits portent à croire qu'il faudrait accorder une attention toute particulière au choix de la durée d'engagement lors de l'élaboration de tels accords internationaux. Le troisième article s'inscrit dans un contexte où les activités de production des pays potentiellement hétérogènes génèrent de la pollution qui peut traverser les frontières et nuire au bien-être des pays impliqués. Dans chacun de ces pays, l'état impose des taxes sur la pollution aux firmes polluantes et des tarifs à l'importation afin de corriger cette distorsion. Ce papier a pour but d'évaluer les effets que pourrait avoir une diminution des tarifs douaniers sur la production, les taxes sur la pollution et le bien-être de ces pays. La littérature existante a étudié ce problème, mais seulement dans le cadre d'un commerce bilatéral entre pays identiques. Cet article fournit un cadre d'analyse plus réaliste dans lequel les pays ne seront pas nécessairement identiques et où le commerce pourra être multilatéral. Il devient alors possible de mettre en évidence le biais introduit en négligeant ces deux facteurs. Dans ce nouveau contexte, je montre qu'une réduction des tarifs d'importation n'augmente pas nécessairement la production; elle peut aussi nuire au bien-être, même si la pollution est purement locale.

Yet another reason to tax goods

The optimal taxation of goods, labor and capital income is considered in a two period model where: i) private information changes through time; ii) savings are not observed, and; iii) savings a§ect preferences conditional on the realization of types. The simultaneous appearance of these three elements cause optimal commodity taxes to depend on o§-equilibrium savings. As a consequence, separability no longer su¢ ces for the uniform taxation prescription of Atkinson and Stiglitz (AS) to obtain. If preferences are homothetic AS is partially restored: taxes are uniform within periods, however, future consumption is taxed at a higher rate than current consumption.

Essays in Environmental Economics

This dissertation comprises four essays on the topic of environmental economics and industrial organization. In the first essay, we develop a two-country world differential game model with a polluting firm in each country to investigate the equilibrium of the game between firms when they decide to trade or not and to see under which conditions social welfare coincides with the market equilibrium. In the second essay, we built a model where firms strategically choose whether to participate in an auction/lottery to attain pollution permits, or instead invest in green R&D, to show that, somewhat counterintuitively, a desirable side effect of the auction is in fact that of fostering environmental R&D in an admissible range of the model parameters. The third essay investigates a second-best trade agreement between two countries when pollution spillovers are asymmetric to examine the strategic behavior of governments in using pollution taxes and tariffs under trade liberalization. The fouth essay studies the profitability of exogenous output constraint in a differential game model with price dynamics under the feedback strategies.

Essays in Industrial Organization

This dissertation comprises four essays on the topic of industrial organization and environmental economics. The first essay investigates the profitability of horizontal mergers of firms with price adjustments. We take a differential game approach and both the open-loop as well as the closed-loop equlibria are considered. In the second essay, using the same approach as the first one, we study the profitability of horizontal merger of firms where the demand function is nonlinear. We take into consideration the open-loop equilibrium. The third essay studies the profitability of exogenous output constraint in a differential game model with price dynamics under the feedback strategies. The fourth essay investigates a second-best trade agreement between two countries when pollution spillovers are asymmetric to examine the strategic behavior of governments in using pollution taxes and tariffs under trade liberalization.

Environmental Policy in Majoritarian Systems

This paper sheds new light on the determination of environmental policies in majoritarian federal electoral systems such as the U.S., and derives implications for the environmental federalism debate on whether the national or local government should have authority over environmental policies. In majoritarian systems, where the legislature consists of geographically distinct electoral districts, the majority party (at either the national or the state level) favors its own home districts; depending on the location of polluting industries and the associated pollution damages, the majority party may therefore impose sub-optimally high or low pollution taxes due to a majority bias. We show that majority bias can influence the social-welfare ranking of alternative government policies and, in some cases, may actually bring distortionary policies closer to the first-best solution.

The impact of taxes on optimal portfolio choice : an Australian study

Taxes are an important component of investing that is commonly overlooked in both the literature and in practice. For example, many understand that taxes will reduce an investment’s return, but less understood is the risk-sharing nature of taxes that also reduces the investment’s risk. This thesis examines how taxes affect the optimal asset allocation and asset location decision in an Australian environment. It advances the model of Horan & Al Zaman (2008), improving the method by which the present value of tax liabilities are calculated, by using an after-tax risk-free discount rate, and incorporating any new or reduced tax liabilities generated into its expected risk and return estimates. The asset allocation problem is examined for a range of different scenarios using Australian parameters, including different risk aversion levels, personal marginal tax rates, investment horizons, borrowing premiums, high or low inflation environments, and different starting cost bases. The findings support the Horan & Al Zaman (2008) conclusion that equities should be held in the taxable account. In fact, these findings are strengthened with most of the efficient frontier maximising equity holdings in the taxable account instead of only half. Furthermore, these findings transfer to the Australian case, where it is found that taxed Australian investors should always invest into equities first through the taxable account before investing in super. However, untaxed Australian investors should invest their equity first through superannuation. With borrowings allowed in the taxable account (no borrowing premium), Australian taxed investors should hold 100% of the superannuation account in the risk-free asset, while undertaking leverage in the taxable account to achieve the desired risk-return. Introducing a borrowing premium decreases the likelihood of holding 100% of super in the risk-free asset for taxable investors. The findings also suggest that the higher the marginal tax rate, the higher the borrowing premium in order to overcome this effect. Finally, as the investor’s marginal tax rate increases, the overall allocation to equities should increase due to the increased risk and return sharing caused by taxation, and in order to achieve the same risk/return level as the lower taxation level, the investor must take on more equity exposure. The investment horizon has a minimal impact on the optimal allocation decision in the absence of factors such as mean reversion and human capital.

Higher fuel prices are associated with lower air pollution levels

Air pollution is a persistent problem in urban areas, and traffic emissions are a major cause of poor air quality. Policies to curb pollution levels often involve raising the price of using private vehicles, for example, congestion charges. We were interested in whether higher fuel prices were associated with decreased air pollution levels. We examined an association between diesel and petrol prices and four traffic-related pollutants in Brisbane from 2010 to 2013. We used a regression model and examined pollution levels up to 16 days after the price change. Higher diesel prices were associated with statistically significant short-term reductions in carbon monoxide and nitrogen oxides. Changes in petrol prices had no impact on air pollution. Raising diesel taxes in Australia could be justified as a public health measure. As raising taxes is politically unpopular, an alternative political approach would be to remove schemes that put a downward pressure on fuel prices, such as industry subsidies and shopping vouchers that give fuel discounts.

Projecting future air pollution-related mortality under a changing climate: Progress, uncertainties and research needs

Background Climate change may affect mortality associated with air pollutants, especially for fine particulate matter (PM2.5) and ozone (O3). Projection studies of such kind involve complicated modelling approaches with uncertainties. Objectives We conducted a systematic review of researches and methods for projecting future PM2.5-/O3-related mortality to identify the uncertainties and optimal approaches for handling uncertainty. Methods A literature search was conducted in October 2013, using the electronic databases: PubMed, Scopus, ScienceDirect, ProQuest, and Web of Science. The search was limited to peer-reviewed journal articles published in English from January 1980 to September 2013. Discussion Fifteen studies fulfilled the inclusion criteria. Most studies reported that an increase of climate change-induced PM2.5 and O3 may result in an increase in mortality. However, little research has been conducted in developing countries with high emissions and dense populations. Additionally, health effects induced by PM2.5 may dominate compared to those caused by O3, but projection studies of PM2.5-related mortality are fewer than those of O3-related mortality. There is a considerable variation in approaches of scenario-based projection researches, which makes it difficult to compare results. Multiple scenarios, models and downscaling methods have been used to reduce uncertainties. However, few studies have discussed what the main source of uncertainties is and which uncertainty could be most effectively reduced. Conclusions Projecting air pollution-related mortality requires a systematic consideration of assumptions and uncertainties, which will significantly aid policymakers in efforts to manage potential impacts of PM2.5 and O3 on mortality in the context of climate change.