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Do emission subsidies reduce emission? In the context of environmental R&D organization

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  • Ouchida, Yasunori
  • Goto, Daisaku

Abstract

This paper, which reexamines the Poyago-Theotoky model, provides additional investigation that was conducted under a corrected environmental damage parameter. As new findings, we obtain the following. First, social welfare under a time-consistent emission tax (emission subsidy) policy is always welfare-enhancing rather than the case of laissez-faire. Second, if the environmental damage parameter is sufficiently small, then the equilibrium emission tax rate is invariably negative. It is therefore an emission subsidy. Moreover, total emissions under the emission subsidy scenario become less than those under laissez-faire if the damage parameter is sufficiently small, and if the R&D cost is low. However, total emissions under the emission subsidy become greater than those under laissez-faire if the damage parameter is sufficiently small, and if the R&D cost is high.

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Bibliographic Info

Article provided by Elsevier in its journal Economic Modelling.

Volume (Year): 36 (2014)
Issue (Month): C ()
Pages: 511-516

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Handle: RePEc:eee:ecmode:v:36:y:2014:i:c:p:511-516

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Web page: http://www.elsevier.com/locate/inca/30411

Related research

Keywords: Emission subsidy; Emission tax; Emission reduction; Environmental R&D; Cournot duopoly;

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References

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  1. Maia David, 2004. "Regulating a Polluting Oligopoly: Emission Tax or Voluntary Agreement?," Working Papers 2004/07, INRA, Economie Publique.
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  15. Poyago-Theotoky, Joanna & Teerasuwannajak, Khemarat, 2002. "The Timing of Environmental Policy: A Note on the Role of Product Differentiation," Journal of Regulatory Economics, Springer, vol. 21(3), pages 305-16, May.
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Cited by:
  1. Yasunori Ouchida & Daisaku Goto, 2014. "Environmental Research Joint Ventures and Time-Consistent Emission Tax," Working Papers 2014.35, Fondazione Eni Enrico Mattei.
  2. Yasunori Ouchida & Daisaku Goto, 2014. "Cournot duopoly and environmental R&D under regulator’s precommitment to an emissions tax," IDEC DP2 Series 4-3, Hiroshima University, Graduate School for International Development and Cooperation (IDEC).

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