Tax Induced Emissions? Estimating Short-Run Emission Impacts from Carbon Taxation under Different Market Structures
41 Pages Posted: 29 Oct 2015 Last revised: 1 Aug 2018
Date Written: January 31, 2017
This article finds that the introduction of a carbon tax increased short-run carbon emissions in an imperfectly competitive wholesale electricity market. The unique feature of the Western Australian setting is that the same carbon tax was introduced and later repealed, but the market structure differed at each event. At the repeal event, the dominant firm had less incentive to exercise unilateral market power. Then, the opposite result is observed -- emissions were lower with the tax. I show how the short-run impact of pollution taxation in imperfect markets depends on production technologies, market structure and the size of the tax.
Keywords: Environmental Taxes and Subsidies; Oligopoly and Other Imperfect Markets; Firm Organization and Market Structure; Electric Utilities; Hydrocarbon Resources; Energy and Environmental Policy
JEL Classification: H23, L13, L22, L94, L98, Q35, Q58
Suggested Citation: Suggested Citation