André García, Francisco JavierDe Castro Lejarriaga, Luis Miguel2023-06-172023-06-1720171464-381210.1093/oep/gpw073https://hdl.handle.net/20.500.14352/18854Prior research has shown that environmental policy can create scarcity rents. We analyse this phenomenon in the framework of a duopoly that faces a carbon price, considering both Cournot and Stackelberg competition. We identify the different sources of scarcity rents, which we classify in ‘output’ and ‘grandfathering’ scarcity rents. The former depend on the elasticity of the rivals’ output to the carbon price, while the latter is exogenous. We also determine under which conditions these rents can be large enough to increase firms’ profits and, as a policy implication, to what extent the existence of scarcity rents can make the firms agree on a tougher policy. This event is more likely to happen under Cournot than under Stackelberg competition, and the chances increase if the firms are allowed to pollute a large amount without paying a price.engjournal articlehttps://doi.org/10.1093/oep/gpw073open accessScarcity rentsCarbon priceCournotStackelberg.Medio ambienteDineroIndicadores económicos2391 Química Ambiental5304.06 Dinero y Operaciones Bancarias5302.01 Indicadores Económicos