Discussion Paper No.2404

Abstract :
In this study, we consider how an environmental policy controls NPS (non-point source) pollution when the standard environmental policies cannot be applied since the regulator is unable to observe individual emis- sion levels of NPS pollution. In Cournot competition, the …rms determine the optimal output and abatement technology levels to maximize their pro…ts, taking the environmental tax rate as given. It is analytically and numerically demonstrated that the ambient charge tax rate can control the total size of NPS pollution under various circumstances, such as duopoly or oligopoly, with or without product di¤erentiation when the …rms are homogeneous or heterogeneous. Keywords: NPS pollution, Ambient charge, Cournot oligopoly com- petition, Homogeneity, Heterogeneity.