Suchergebnisse

We explore the design of self-financing tax-subsidy schemes to solve hold-up problems in environmental regulation. The announcement of the tax rate seems to be preferable to solve hold-up problems with respect to the investment in environmental R&D. In contrast, only the announcement of the subsidy rate is adequate to solve hold-up problems with respect to the licensing of environmentally friendly technologies. Altogether, the announcement of the subsidy rate yields higher expected social welfare than the announcement of the tax rate or the standard emission taxation if the marginal damage of emissions exceeds a certain level.

We consider the application of self-financing tax/subsidy mechanisms in environmental regulation and explore the question whether these mechanisms yield strong investment incentives in a market with many firms under Cournot competition. It turns out that the tax/subsidy mechanism with the announcement of the subsidy rate and the tax/subsidy mechanism with the announcement of the tax rate work for an arbitrary number of firms, which means that they yield strong incentives for investing in environmentally friendly technologies. The announcement of the subsidy rate is preferable for solving hold-up problems.

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.