Taxes versus permits as incentive for the intertemporal supply of a clean technology by a monopoly
AbstractThis paper investigates the intertemporal monopolistic supply of a clean technology and addresses the following questions: How does the lack of governments to commit restrict the incentives and thereby the supply of clean technologies? Are either emission taxes or emission permits better suited in such a dynamic setting? Although the monopoly can be forced to price taking behaviour, the inability of governments to commit leads to too slow and to too little expansion. Prices and quantities are equivalent for different kinds of government's objectives. An (important) exception is the case of non-competitive supply of the dirty input: taxes dominate from a welfare perspective however due to the additional scope to accrue rents and not due to an improvement of incentives for the development of clean technologies. Permits eliminate pollution entirely, which fosters the expansion of the clean technology.
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Bibliographic InfoArticle provided by Elsevier in its journal Resource and Energy Economics.
Volume (Year): 36 (2014)
Issue (Month): 1 ()
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Web page: http://www.elsevier.com/locate/inca/505569
Lack of commitment; Taxes versus permits; External costs; Non-competitive supply; Dynamic game;
Find related papers by JEL classification:
- D62 - Microeconomics - - Welfare Economics - - - Externalities
- Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters
- C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
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