Most of the literature dealing with Environmental Policies (EPs) in the presence of an eco-industry adopts very restrictive assumptions, as that of exogenous timing in setting EPs with the government moving first in choosing the emission tax level, and that of symmetric firms in the downstream sector.
Starting from these drawbacks, we plan to build a model with two asymmetric downstream firms and an upstream eco-industry, and under the assumption that the more efficient firm may either obtain the environmental technology from the innovator, or engage in abatement effort or finally do not abate at all. In this set-up, we want to compare the optimal tax levels that would be imposed if the government can commit to an ex-ante emission tax level or rather it sets its tax rate ex-post. The analysis of two different policy regimes- the ex-ante and the ex-post one - allows us to incorporate the hypothesis that firms react strategically to any government decision. In the first regime, the government can commit to a specific tax level while in the second regime firms, knowing that the government is unable to commit, will anticipate the government decision.
We plan then to assess whether the optimal tax differs from the Pigouvian prescription, and the effects of EP on environmental innovation, on overall emissions reduction and on social welfare under the two different policy regimes.
