About polluting eco-industries: optimal provision of abatement goods and Pigouvian fees

  • Received June 10, 2017;
    Accepted July 12, 2017;
    Published September 11, 2017
  • Author(s)
    Damien Sans ,
    Sonia Schwartz
    ORCID , Hubert Stahn
  • DOI
    http://dx.doi.org/10.21511/ee.08(3).2017.05
  • Article Info
    Volume 8 2017, Issue #3, pp. 46-61
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    2 articles
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In this article, the authors introduce a polluting eco-industry. Depending on the level of damage, there are two optimal equilibria. If the damage is low, one generalizes the usual results of the economic literature to the polluting eco-industry: the dirty firm partially abates their emissions, only efficient eco-industry firms produce and the abatement level increases with the damage. However, very specific results are obtained if the damage is high. In this case, not all efficient eco-industry firms produce. The abatement level and the number of active eco-industry firms both decrease as the damage increases. The authors finally show that a well-designed Pigouvian tax implements these equilibria in a competitive economy.

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Environmental Economics