Optimality of emission pricing policies based on emission intensity targets under imperfect competition

摘要

This study proposes an emission-intensity-based emission tax as a policy solution for negative environmental externality in oligopoly markets. Emissions are taxed when firms' emission intensities exceed their target level. We show that even under imperfect competition, this emission pricing policy leads to the first-best outcome. The optimal tax rate is equal to the Pigovian tax. This principle can also apply to tradable emission permits traded based on emission intensity targets.& nbsp; (c) 2021 Elsevier B.V. All rights reserved.