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Impact of carbon capture and storage, cap-and-trade, and multiproduct cost structure on pollution in an oligopoly

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  • Chen, Shi
  • Duan, Xiaoyu
  • Lin, Jyh-Horng
  • Chang, Ching-Hui

Abstract

This paper presents an oligopolistic model to examine the effects of cap-and-trade regulations, carbon capture and storage (CCS), and multiproduct cost structures on reducing pollution emissions. It investigates an oligopoly consisting of both carbon-intensive and environmentally friendly manufacturers that produce goods and pollutants concurrently. The findings suggest that in a quasi-competitive or Cournot-type conjectural variation (CV), a tighter cap leads to increased pollution from the carbon-intensive manufacturer but decreased pollution in a collusive CV. Moreover, this stricter cap notably diminishes the equity of the carbon-intensive manufacturer in a collusive scenario and that of the green manufacturer in a quasi-competitive environment. When the green manufacturer adopts advanced CCS technology or operates with a subadditive cost structure, pollution from the carbon-intensive manufacturer decreases in quasi-competitive and collusive scenarios but increases under Cournot-type CV. Meanwhile, the green manufacturer experiences the greatest equity boost with advanced CCS technology in collusive settings, while its equity decreases most significantly with a subadditive cost structure in quasi-competitive CV. Our contribution indicates that the efficacy of climate policies in oligopolies depends on both multiproduct cost structures and CVs employed.

Suggested Citation

  • Chen, Shi & Duan, Xiaoyu & Lin, Jyh-Horng & Chang, Ching-Hui, 2024. "Impact of carbon capture and storage, cap-and-trade, and multiproduct cost structure on pollution in an oligopoly," Energy Economics, Elsevier, vol. 137(C).
  • Handle: RePEc:eee:eneeco:v:137:y:2024:i:c:s014098832400481x
    DOI: 10.1016/j.eneco.2024.107773
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    More about this item

    Keywords

    Cap-and-trade; Carbon capturer and storage; Conjectural variation; Multiproduct cost; Pollution;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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