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The persistence of environmental and social strategies under emission permits

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  • Iannucci, Gianluca
  • Tampieri, Alessandro

Abstract

In this paper, we analyse the long-run industry configuration of an oligopoly where profit-seeking (PS) and environmentally socially responsible (ECSR) firms compete in quantities. We adopt an evolutionary setting to determine the firms’ endogenous choice of statute (PS or ECSR). Pollution is regulated through an Emission Trading System (ETS) scheme that allocates emissions rights to firms. Firms may also invest in emission abatement technology to reduce the cost of emission rights. Our findings show that the introduction of an ETS favours the persistence of the ECSR strategy by reducing the share of PS firms in the industry. In contrast, an increase in the stringency of the ETS policy makes the PS strategy more competitive.

Suggested Citation

  • Iannucci, Gianluca & Tampieri, Alessandro, 2024. "The persistence of environmental and social strategies under emission permits," Energy Economics, Elsevier, vol. 138(C).
    • Handle: RePEc:eee:eneeco:v:138:y:2024:i:c:s0140988324005322
    DOI: 10.1016/j.eneco.2024.107824
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    Cited by:

    1. Davide Radi & Frank Westerhoff, 2024. "The green transition of firms: The role of evolutionary competition, adjustment costs, transition risk, and green technology progress," Papers 2410.20379, arXiv.org.

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    More about this item

    Keywords

    Mixed oligopoly markets; Emission reduction investment; Environmentally concerned firms; Emission trading system;
    All these keywords.

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility

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