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This article considers an N-firm oligopoly with abating and non-abating firms and analyses a dynamic setting in which the environmental regulator sets the tax rate to incentivise firms to undertake emission-reduction actions according to different hypotheses (fixed rule and optimal rule). The behaviour of the public authority sharply affects the firm's (individual) incentive to move towards the abatement activity over time. This changes the number of (non)abating firms on the market and the corresponding social welfare outcomes. The article eventually shows that the environmental policy may cause oscillations resulting in a coexistence of the two types of firms in the long term and pinpoints the welfare outcomes emerging in the model. [ABSTRACT FROM AUTHOR]

We propose a model for exploring the feasibility and effectiveness of a green transition from dirty to clean technologies. It relies on an evolutionary framework for the technology selection that accounts for the environmental domain dynamics, in terms of pollution evolution. A regulator charges an environmental tax to the producers, and the agents can choose between the less profitable clean technology and the more profitable dirty one, which, however, is taxed to a greater extent with respect to the clean one. The environmental tax depends endogenously on the level of pollution, which rises because of the producers' emissions. The pollution stock also naturally decays, and can be abated by involving the resources collected from the taxation. We analytically study the resulting two-dimensional model from both statically and dynamically, to understand under what conditions the green transition can take place and results in an improvement for the environmental quality. We show that excessive over-taxation of the dirty technology may be not beneficial, as steady state pollution level can increase above a certain taxation threshold and multiple steady states can emerge. Moreover, dynamics can result in persistent endogenous oscillations that systematically lead to a significant increase in pollution levels. Finally, we discuss the economic rationale for the results also in the light of possible policy suggestions. [ABSTRACT FROM AUTHOR]

This paper proposes a strategic model of pollution control. A firm, representative of the productive sector of a country, aims at maximizing its profits by expanding its production. Assuming that the output of production is proportional to the level of pollutants' emissions, the firm increases the level of pollution. The government of the country aims at minimizing the social costs due to the pollution, and introduces regulatory constraints on the emissions' level, which then effectively cap the output of production. Supposing that the firm and the government face both proportional and fixed costs in order to adopt their policies, we model the previous problem as a stochastic impulse two-person nonzero-sum game. The state variable of the game is the level of the output of production which evolves as a general linearly controlled one-dimensional Itô-diffusion. Following an educated guess, we first construct a pair of candidate equilibrium policies and of corresponding equilibrium values, and we then provide a set of sufficient conditions under which they indeed realize an equilibrium. Our results are complemented by a numerical study when the (uncontrolled) output of production evolves as a geometric Brownian motion, and the firm's operating profit and the government's running cost functions are of power type. An analysis of the dependency of the equilibrium policies and values on the model parameters yields interesting new behaviors that we explain as a consequence of the strategic interaction between the firm and the government. [ABSTRACT FROM AUTHOR]

Growing global concerns of environmental problems have led to the emergence of policies and regulations to control carbon emissions in the industrial sector. These regulations must be taken into consideration to obtain optimal operational decisions on production, inventory and routing in supply chain network models. In this study, we consider the reverse logistics supply chain model with a remanufacturing option to reduce carbon emissions. We aim at providing optimal production, inventory and delivery quantities along with delivery and pickup routes under a carbon cap-and-trade emissions policy. We provide a mathematical formulation of the problem that considers heterogeneous transportation fleets and allows for lost sales under the cap-and-trade carbon emissions policy. The proposed mathematical model is provided in a deterministic and a two-stage stochastic versions to account for demand uncertainty. Proposed formulations are demonstrated through a simulated reverse logistics supply chain with added sensitivity analysis to test for the effect of modeling parameters on the optimal problem solution. Simulation results indicate that carbon policies have significant effect on the supply chain performance with carbon price as the most significant parameter. [ABSTRACT FROM AUTHOR]

In this paper we analyze the economic effects of implementing EPA's newly proposed regulations for carbon dioxide ( $$\hbox {CO}_2$$ ) on existing U.S. coal-fired power plants using nonparametric methods on a sample of 144 electricity generating units. Moreover, we develop an approach for evaluating the economic gains from averaging emission intensities among the utilities' generating units, compared to implementing unit-specific performance standards. Our results show that the implementation of flexible standards leads to up to 2.7 billion dollars larger profits compared to the uniform standards. Moreover, we find that by adopting best practices, current profits can be maintained even if an intensity standard of 0.88 tons of $$\hbox {CO}_2$$ per MWh is implemented. However, our results also indicate a trade-off between environmental and profit gains, since aggregate $$\hbox {CO}_2$$ emissions are higher with emission intensity averaging than with uniform standards. [ABSTRACT FROM AUTHOR]

Although the biofuel market remains at its early stage, it is expected to play an important role in climate policy in the future in the transportation sector. In this paper, we develop a bottom-up equilibrium model to study the supply chain of the biofuel market, explicitly formulating the interactions among farmers, biofuel producers, blenders, and consumers. The model is built on optimization problems faced by each entity and considers decisions associated with farmers' land allocation, biomass transportation, biofuel production, and biofuel blending. As such, the model is capable of and appropriate for policy analysis related to interactions among multiple stakeholders. For example, the model can be used to analyze the impacts of biofuel policies on market outcomes, pass-through of taxes or subsidies, and distribution of consumers' or producers' surplus. The equilibrium model can also serve as an analytical tool to study the price impact of biomass, biofuel, and Renewable Identification Numbers (RINs) for biofuels. We demonstrate the model by applying it to a case study of Iowa. We specifically focus on the effects of market structure, i.e., points-of-implementation on subsidies on market outcomes. The results indicate that some entities can benefit greatly at the expense of others when they possess market power. Government oversight is therefore needed to safeguard the development of the sector. [ABSTRACT FROM AUTHOR]

The paper focuses on the impact of emission 'cap-and-trade' mechanism in a so-called emission-dependent supply chain with the emission permit supplier and the emission-dependent firm. In the cap-and-trade system, emission permit becomes one of key factors of production for emission-dependent firms. Two major sources of emission permits are considered-emission cap/quota imposed by the government, and permits purchased via emission trading. If the quota is insufficient to satisfy the target production, extra permits should be purchased via trading. In this case, the traditional non-profit green organizations may be endowed with the role of emission permit suppliers. Thus, the introduction of market mechanism injects new life into environment protection. In the context of newsvendor, the paper investigates the behavior and decision-making of each member in the emission-dependent supply chain. A game-theoretical analytical model is proposed and the unique Nash equilibrium is derived. In their own self-interest, the emission permit supplier and the emission-dependent firm make their optimal decisions on permits pricing and production quantity respectively. Players' bargaining power in the game is affected by several exogenous factors, such as the governmental environment policy, the market risk, etc. Several valuable managerial insights on bargaining power affected by external factors (such as environmental policies, market risks, etc.) are further concluded. [ABSTRACT FROM AUTHOR]

This paper re-examines the formation of International Environmental Agreements (IEAs) modelled as a two-stage non-cooperative game when countries' strategies to control pollution are complementary. This new assumption relying on empirical and theoretical evidences means that reinforcement effects do exist between countries' strategies when polluting or abating. From a deliberately conventional model the results established analytically strongly contrast with those in the literature on IEAs. We find that the unique stable agreement can consist in half countries involved in the negotiation; we demonstrate that the environmental impact of such cooperation is almost total: it tends toward the one of the full cooperative solution. Even if the incentives to free-ride are less strong, we do not observe the formation of the 'grand' coalition: not all the countries sign the agreement. We also explain why the level of cooperation is decreasing with the perception countries have of the seriousness of the problem. [ABSTRACT FROM AUTHOR]

The directional distance function defined in a DEA type non-parametric framework provides a highly flexible structure for modelling producer behaviour in the presence of polluting emissions and environmental regulations. This article presents five models describing different 'command and control' type policy measures as an economic one about nitrogen pollution of agricultural origin. These measures concern the management of the mandatory constraint on the spreading of organic manure and the investment in manure treatment facilities. The study also simulates the use of an economic instrument by enforcing the individual manure constraint at an aggregated level. Using individual and aggregated DEA models, this paper provides insights into the impact of individual and collective management of environmental policy instruments. [ABSTRACT FROM AUTHOR]