Strategic environmental policy and the accumulation of knowledge
AbstractIn dealing with a transnational pollutant-emitting duopoly welfare-maximising policy makers face two negative externalities: imperfect competition and unpriced emissions. Strategic environmental policy models show that these externalities involve a trade-off between reducing pollution and allowing for rent-seeking of the respective firm. This dilemma usually results in a suboptimal internalisation of the negative externality emerging from emissions. Indeed, the conventional model setup includes an R&D stage that enables the firms to mitigate regulation costs. But the typical one period configuration ignores that R&D expenditures create knowledge capital which is, due to its inherent cumulativeness, also effective in following periods. Our model analyses the established trade-off in a two period setting and therefore allows for an investigation of intertemporal knowledge accumulation. We find that the intertemporal effects provide an incentive for a policy maker to set a higher tax rate compared to a one-period setup which lessens the magnitude of the suboptimal internalisation of emissions. Under certain conditions even a tax rate above the Pigouvian level is possible in period 1.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by Elsevier in its journal Structural Change and Economic Dynamics.
Volume (Year): 22 (2011)
Issue (Month): 2 (June)
Contact details of provider:
Web page: http://www.elsevier.com/locate/inca/525148
Strategic environmental policy Induced innovation Knowledge capital;
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Gerlagh , Reyer & Kverndokk , Snorre & Rosendahl , Knut Einar, 2007.
"Optimal Timing of Environmental Policy: Interaction Between Environmental Taxes and Innovation Externalities,"
26/2006, Oslo University, Department of Economics.
- Reyer Gerlagh & Snorre Kverndokk & Knut Einar Rosendahl, 2007. "Optimal Timing of Environmental Policy; Interaction Between Environmental Taxes and Innovation Externalities," Working Papers 2007.35, Fondazione Eni Enrico Mattei.
- Reyer Gerlagh & Snorre Kverndokk & Knut Einar Rosendahl, 2007. "Optimal Timing of Environmental Policy. Interaction between Environmental Taxes and Innovation Externalities," Discussion Papers 493, Research Department of Statistics Norway.
- Michael Hoel & Rolf Golombek, 2006.
"Endogenous Technology and Tradable Emission Quotas,"
2006.42, Fondazione Eni Enrico Mattei.
- Golombek, Rolf & Hoel, Michael, 2008. "Endogenous technology and tradable emission quotas," Resource and Energy Economics, Elsevier, vol. 30(2), pages 197-208, May.
- Golombek, Rolf & Hoel, Michael, 2006. "Endogenous technology and tradable emission quotas," Memorandum 03/2006, Oslo University, Department of Economics.
- Ulph, A. & Ulph, D., 1994. "Trade, strategic innovation and strategic environmental policy: a general analysis," Discussion Paper Series In Economics And Econometrics 9416, Economics Division, School of Social Sciences, University of Southampton.
- Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, January.
- Dixit, Avinash K, 1986. "Comparative Statics for Oligopoly," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 27(1), pages 107-22, February.
- Kenneth Arrow, 1962. "Economic Welfare and the Allocation of Resources for Invention," NBER Chapters, in: The Rate and Direction of Inventive Activity: Economic and Social Factors, pages 609-626 National Bureau of Economic Research, Inc.
- Jaffe, Adam B. & Newell, Richard G. & Stavins, Robert N., 2005.
"A tale of two market failures: Technology and environmental policy,"
Elsevier, vol. 54(2-3), pages 164-174, August.
- Stavins, Robert & Jaffe, Adam & Newell, Richard, 2004. "A Tale of Two Market Failures: Technology and Environmental Policy," Discussion Papers dp-04-38, Resources For the Future.
- Simpson, R. David & Bradford, Robert III, 1996. "Taxing Variable Cost: Environmental Regulation as Industrial Policy," Journal of Environmental Economics and Management, Elsevier, vol. 30(3), pages 282-300, May.
- Hart, Rob, 2008. "The timing of taxes on CO2 emissions when technological change is endogenous," Journal of Environmental Economics and Management, Elsevier, vol. 55(2), pages 194-212, March.
- Rauscher, Michael, 1994. "On Ecological Dumping," Oxford Economic Papers, Oxford University Press, vol. 46(0), pages 822-40, Supplemen.
- Golombek Rolf & Hoel Michael, 2006. "Second-Best Climate Agreements and Technology Policy," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 6(1), pages 1-30, January.
- Eberhard Feess & Gerd Muehlheusser, 2002. "Strategic Environmental Policy, Clean Technologies and the Learning Curve," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 23(2), pages 149-166, October.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).
If references are entirely missing, you can add them using this form.