We explore the design of self-financing tax-subsidy schemes to solve hold-up problems in environmental regulation. The announcement of the tax rate seems to be preferable to solve hold-up problems with respect to the investment in environmental R&D. In contrast, only the announcement of the...

We consider the application of self-financing tax/subsidy mechanisms in environmental regulation and explore the question whether these mechanisms yield strong investment incentives in a market with many firms under Cournot competition. It turns out that the tax/subsidy mechanism with the...