Emissions taxes under double-sided environmental externalities
It is well established that if a polluter exercises market power, the optimal emission tax should be set below the Pigouvian level, i.e., the marginal damage of pollution. In this paper, we show that relying on this intuition can be misleading if pollution is generated by both production and consump...
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2024
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| Online Access: | http://hdl.handle.net/10725/17325 https://doi.org/10.1016/j.econlet.2024.111884 http://libraries.lau.edu.lb/research/laur/terms-of-use/articles.php https://www.sciencedirect.com/science/article/pii/S0165176524003689 |
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| _version_ | 1864513474366799872 |
|---|---|
| author | Abdul Baki, Ghina |
| author2 | Benchekroun, Hassan Marrouch, Walid |
| author2_role | author author |
| author_facet | Abdul Baki, Ghina Benchekroun, Hassan Marrouch, Walid |
| author_role | author |
| dc.creator.none.fl_str_mv | Abdul Baki, Ghina Benchekroun, Hassan Marrouch, Walid |
| dc.date.none.fl_str_mv | 2024 2024-09 2025-10-03T13:10:28Z 2025-10-03T13:10:28Z |
| dc.identifier.none.fl_str_mv | 0165-1765 http://hdl.handle.net/10725/17325 https://doi.org/10.1016/j.econlet.2024.111884 Baki, G. A., Benchekroun, H., & Marrouch, W. (2024). Emissions taxes under double-sided environmental externalities. Economics Letters, 242, 111884. http://libraries.lau.edu.lb/research/laur/terms-of-use/articles.php https://www.sciencedirect.com/science/article/pii/S0165176524003689 |
| dc.language.none.fl_str_mv | en |
| dc.relation.none.fl_str_mv | Economics Letters |
| dc.rights.*.fl_str_mv | info:eu-repo/semantics/openAccess |
| dc.title.none.fl_str_mv | Emissions taxes under double-sided environmental externalities |
| dc.type.none.fl_str_mv | Article info:eu-repo/semantics/publishedVersion info:eu-repo/semantics/article |
| description | It is well established that if a polluter exercises market power, the optimal emission tax should be set below the Pigouvian level, i.e., the marginal damage of pollution. In this paper, we show that relying on this intuition can be misleading if pollution is generated by both production and consumption. Specifically, we build a partial equilibrium model based on a monopoly power exerted over a final product, where the production and consumption of this product impose an environmental externality. We find that the first best can be attained by a combination of taxes on pollution from production and consumption, where the tax on the polluting monopoly is set precisely at the Pigouvian level, whereas the tax on (price-taking) consumers is set below the Pigouvian level. |
| eu_rights_str_mv | openAccess |
| format | article |
| id | LAURepo_af42a3d4f18b7d62027abbd227fd47d7 |
| identifier_str_mv | 0165-1765 Baki, G. A., Benchekroun, H., & Marrouch, W. (2024). Emissions taxes under double-sided environmental externalities. Economics Letters, 242, 111884. |
| language_invalid_str_mv | en |
| network_acronym_str | LAURepo |
| network_name_str | Lebanese American University repository |
| oai_identifier_str | oai:laur.lau.edu.lb:10725/17325 |
| publishDate | 2024 |
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| spelling | Emissions taxes under double-sided environmental externalitiesAbdul Baki, GhinaBenchekroun, HassanMarrouch, WalidIt is well established that if a polluter exercises market power, the optimal emission tax should be set below the Pigouvian level, i.e., the marginal damage of pollution. In this paper, we show that relying on this intuition can be misleading if pollution is generated by both production and consumption. Specifically, we build a partial equilibrium model based on a monopoly power exerted over a final product, where the production and consumption of this product impose an environmental externality. We find that the first best can be attained by a combination of taxes on pollution from production and consumption, where the tax on the polluting monopoly is set precisely at the Pigouvian level, whereas the tax on (price-taking) consumers is set below the Pigouvian level.Published2025-10-03T13:10:28Z2025-10-03T13:10:28Z20242024-09Articleinfo:eu-repo/semantics/publishedVersioninfo:eu-repo/semantics/article0165-1765http://hdl.handle.net/10725/17325https://doi.org/10.1016/j.econlet.2024.111884Baki, G. A., Benchekroun, H., & Marrouch, W. (2024). Emissions taxes under double-sided environmental externalities. Economics Letters, 242, 111884.http://libraries.lau.edu.lb/research/laur/terms-of-use/articles.phphttps://www.sciencedirect.com/science/article/pii/S0165176524003689enEconomics Lettersinfo:eu-repo/semantics/openAccessoai:laur.lau.edu.lb:10725/173252025-10-03T13:10:28Z |
| spellingShingle | Emissions taxes under double-sided environmental externalities Abdul Baki, Ghina |
| status_str | publishedVersion |
| title | Emissions taxes under double-sided environmental externalities |
| title_full | Emissions taxes under double-sided environmental externalities |
| title_fullStr | Emissions taxes under double-sided environmental externalities |
| title_full_unstemmed | Emissions taxes under double-sided environmental externalities |
| title_short | Emissions taxes under double-sided environmental externalities |
| title_sort | Emissions taxes under double-sided environmental externalities |
| url | http://hdl.handle.net/10725/17325 https://doi.org/10.1016/j.econlet.2024.111884 http://libraries.lau.edu.lb/research/laur/terms-of-use/articles.php https://www.sciencedirect.com/science/article/pii/S0165176524003689 |