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The Impact of Environmental Standards as a Public Environmental Policy Tool on the Market Structure of Polluting Industries
Authors: Luciano Fanti, Domenico Buccella
Number of views: 415
This paper investigates the effects of public environmental policies on the market
structure in a Cournot context. It is shown that when the Government fixes upper limits to emissions,
higher environmental social concerns favour entry of a firm. On the other hand, the abatement
technology may act as a barrier or an incentive to entry depending on the government’s
environmental sensitiveness; however, a more efficient technology tends to disfavour entry. In
addition, if the size of the fixed costs is relatively high, the duopoly market structure will lead to
social welfare level lower than in the presence of monopoly. On the other hand, an improvement of
the efficiency of the abatement technology may, in the presence of a low social interest for controlling
pollution, play the role of a barrier to entry. The empirical and policy implications of these results
are discussed.
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