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Environmental regulations in private and mixed duopolies: Taxes on emissions versus green R&D subsidies

Author

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  • Lee, Sang-Ho
  • Park, Chul-Hi

Abstract

In this article, we compare two kinds of environmental regulations—emissions taxes and green R&D subsidies—in private and mixed-duopoly markets in the presence of R&D spillovers. We show that a green R&D subsidy is better (worse) than an emissions tax when the green R&D is efficient (inefficient), irrespective of R&D spillovers, whereas the existence of a publicly owned firm encourages the government to adopt a subsidy policy. We also show that the optimal policy choice depends on R&D efficiency and spillovers. In particular, when green R&D is inefficient and the spillover rate is low (high), the government should choose an emissions tax and (not) privatize the state-owned firm. When green R&D is efficient, however, an R&D subsidy is better, but a privatization policy is not desirable for society, irrespective of spillovers.

Suggested Citation

  • Lee, Sang-Ho & Park, Chul-Hi, 2021. "Environmental regulations in private and mixed duopolies: Taxes on emissions versus green R&D subsidies," Economic Systems, Elsevier, vol. 45(1).
    • Handle: RePEc:eee:ecosys:v:45:y:2021:i:1:s0939362520301709
    DOI: 10.1016/j.ecosys.2020.100852
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    Citations

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    Cited by:

    1. Jiaqi Chen & Sang-ho Lee, 2022. "R&D rivalry with the interaction of output subsidies in an extensive endogenous timing game," Economics Bulletin, AccessEcon, vol. 42(3), pages 1621-1630.
    2. Xu, Lili & Chen, Yuyan & Lee, Sang-Ho, 2022. "Emission tax and strategic environmental corporate social responsibility in a Cournot–Bertrand comparison," Energy Economics, Elsevier, vol. 107(C).
    3. Karmaker, Shamal Chandra & Hosan, Shahadat & Chapman, Andrew J. & Saha, Bidyut Baran, 2021. "The role of environmental taxes on technological innovation," Energy, Elsevier, vol. 232(C).
    4. Buccella, Domenico & Fanti, Luciano & Gori, Luca, 2023. "Green subsidies as strategic trade policy tools," GLO Discussion Paper Series 1240, Global Labor Organization (GLO).
    5. Jinxuan Song & Xu Yan, 2023. "Impact of Government Subsidies, Competition, and Blockchain on Green Supply Chain Decisions," Sustainability, MDPI, vol. 15(4), pages 1-27, February.
    6. Lili Xu & Sang‐Ho Lee, 2022. "Non‐cooperative and cooperative environmental corporate social responsibility with emission taxes," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(7), pages 2849-2862, October.
    7. Li, Zhengda & Zheng, Chengxin & Liu, Aimin & Yang, Yang & Yuan, Xiaoling, 2022. "Environmental taxes, green subsidies, and cleaner production willingness: Evidence from China's publicly traded companies," Technological Forecasting and Social Change, Elsevier, vol. 183(C).
    8. Zibiao Li & Siwei Wang & Keyuan Sun & Han Li & Xue Lu, 2022. "Energy Conservation or Emission Reduction? The Effects of Different Types of Environmental Regulations on Enterprises’ Green Innovation Preference," SAGE Open, , vol. 12(2), pages 21582440221, June.
    9. Jafar Hussain & Chien‐Chiang Lee, 2022. "A green path towards sustainable development: Optimal behavior of the duopoly game model with carbon neutrality instruments," Sustainable Development, John Wiley & Sons, Ltd., vol. 30(6), pages 1523-1541, December.
    10. Xiao Yu & Yingdong Xu & Jian Zhang & Yue Sun, 2022. "The Synergy Green Innovation Effect of Green Innovation Subsidies and Carbon Taxes," Sustainability, MDPI, vol. 14(6), pages 1-27, March.
    11. Buccella, Domenico & Fanti, Luciano & Gori, Luca, 2024. "Corporate Social Responsibility: A theory of the firm revisited with environmental issues," GLO Discussion Paper Series 1421, Global Labor Organization (GLO).
    12. Kim, Seung-Leul & Lee, Sang-Ho, 2021. "Optimal tariffs with emissions taxes under non-restrictive two-part licensing strategies by a foreign eco-competitor," MPRA Paper 108496, University Library of Munich, Germany.
    13. de Frutos Cachorro, Julia & Martín-Herrán, Guiomar & Tidball, Mabel, 2024. "Commitment vs. noncommitment behaviors in natural resource conflicts: A case study of groundwater resources," Economic Modelling, Elsevier, vol. 132(C).
    14. Jia Xue & Youshi He & Peng Gao & Yin Tang & Hanyang Xu, 2022. "Multi-Agent Evolutionary Game Model: Corporate Low-Carbon Manufacturing, Chinese Government Supervision, and Public Media Investigation," Sustainability, MDPI, vol. 14(9), pages 1-24, May.
    15. Jiaqi Chen & Sang‐Ho Lee, 2023. "Cournot–Bertrand comparisons under R&D competition: Output versus R&D subsidies," International Journal of Economic Theory, The International Society for Economic Theory, vol. 19(1), pages 77-100, March.

    More about this item

    Keywords

    Emissions tax; Green R&D subsidy; Privatization policy; R&D spillovers;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility

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