Abstract
The paper presents a tool for the simulation of environmental policy impact. The main concern deals with different market structures and policy results. The subject is analyzed with use of an investment schedule of a representative firm, which faces the choice of two possible production technologies. Both technologies produce the same homogenous product. However, one of the technologies is viewed as a pollutant industrial technology with great negative externalities. Therefore an environmental policy maker may wish to use some indirect tools to influence the investment schedule. The policy maker may tax or subsidize capital used in any technological process. The impact of these indirect tools on the statics and dynamics of the firm's investment schedule is examined under standard neoclassical hypotheses: i.e. rationality and profit maximization.
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