Environmental Investments in Mixed vs Private Oligopoly: What are the Implications of Privatization?

We compare economic and environmental outcomes under mixed and private oligopolies, in order to examine the effects of privatization when firms invest in abatement and emissions are taxed. We show that the number of competing firms in the market is an important factor in the determination of these effects. While privatization often involves a welfare trade-off, in the sense that higher (lower) output production implies higher (lower) pollution, there are also circumstances where it leads to both lower output and higher emissions simultaneously. Our results also indicate that privatization tends be associated with reductions in social welfare.