Competing Recombinant Technologies for Environmental Innovation
AbstractThis article presents a model of sequential decisions about investments in environmentally dirty and clean technologies, which extends the path-dependence framework of Arthur (1989). This allows us to evaluate if and how an economy locked into a dirty technology can be unlocked and move towards the clean technology. The main extension involves the inclusion of the effect of recombinant innovation of the two technologies. A mechanism of endogenous competition is described involving a positive externality of increasing returns to investment which are counterbalanced by recombinant innovation. We determine conditions under which lock-in can be avoided or escaped. A second extension is "symmetry breaking" of the the system due to the introduction of an environmental policy that charges a price for polluting. A final extension adds a cost of environmental policy in the form of lower returns on investment implemented through a growth-depressing factor. We compare cumulative pollution under different scenarios, so that we can evaluate the combination of environmental regulation and recombinant innovation.
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Bibliographic InfoPaper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 10-107/1.
Date of creation: 26 Oct 2010
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externalities; hybrid technology; lock-in; R&D; sequential decisions;
Find related papers by JEL classification:
- O33 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
- Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-02-26 (All new papers)
- NEP-CSE-2011-02-26 (Economics of Strategic Management)
- NEP-ENE-2011-02-26 (Energy Economics)
- NEP-ENV-2011-02-26 (Environmental Economics)
- NEP-HME-2011-02-26 (Heterodox Microeconomics)
- NEP-INO-2011-02-26 (Innovation)
- NEP-REG-2011-02-26 (Regulation)
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