Presentation on YouTube.

We analyze a duopoly composed of a clean and a dirty firm. The dirty one has to pay an emission tax. Both firms face a random loss that is a function of the dirty firm’s output. The firms can reduce the risk by stipulating an insurance contract and choosing a coinsurance rate. The game develops in three stages: 1) strategy selection, 2) output choices, 3) insurance decisions. We find that not only taxation but also insurance, under some conditions, can favor a green transition.