Profit-enhancing emissions taxes in near-zero-emissions industries

Hirose, Kosuke and Ishihara, Akifumi and Matsumura, Toshihiro (2025): Profit-enhancing emissions taxes in near-zero-emissions industries.

Abstract

Motivated by the recent global trend of net-zero-emissions environmental regulations, we investigate the relationship between emissions tax rates and firm profits in oligopolies. Our result indicates that when the resulting emission levels are approximately zero, a marginal increase in the tax rate enhances firms' profits except in monopoly markets. This finding suggests that firms might not resist a further increase in environmental tax if the target emissions level is sufficiently low. Moreover, we present parametric numerical examples suggesting that the profit-enhancing range is large and not limited to near-zero emissions.

• Item Type: MPRA Paper
• Language: English
• Keywords: net-zero-emissions industries; emissions tax; oligopolies
• Subjects: L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L13 - Oligopoly and Other Imperfect Markets; L - Industrial Organization > L5 - Regulation and Industrial Policy > L51 - Economics of Regulation; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q5 - Environmental Economics > Q52 - Pollution Control Adoption and Costs ; Distributional Effects ; Employment Effects

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