In this article I survey the theoretical literature on environmental policy in the presence of imperfect competition, ranging from early contributions in the 1960s to the present. I cover the following market structures when polluting firms have market power in the output market: monopoly,...

A system of tradable permits in the standard setting is effective in attaining the policy objective with regard to pollution reduction at the least cost. This outcome is challenged in case of a tradable permit system in a federal state with individual states having discretionary power regarding...