Self-Financing Environmental Mechanisms

Joerg Breitscheidel and Hans Gersbach

No 1528, CESifo Working Paper Series from CESifo

Abstract: We explore the design of self-financing tax/subsidy mechanisms to solve hold-up problems in environmental regulation. Under Cournot competition, announcing the subsidy rate seems to be preferable to announcing the tax rate. Moreover, for constant marginal damage the hold-up problem can always be solved by setting subsidies. Under Bertrand competition, only announcing the tax rate can induce at least one firm to invest. We suggest that feebate systems in the automotive sector should be designed as self-financing tax/subsidy mechanisms.

Keywords: hold-up problems; environmental regulation; taxes and subsidies; self-financing mechanisms; emission control (search for similar items in EconPapers)
Date: 2005
New Economics Papers: this item is included in nep-env and nep-res
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_1528

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