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Cooperation in Green R&D and Environmental Policies: Taxes or Standards

Author

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  • Marie-Laure Cabon-Dhersin

    (LERN - Laboratoire d'Economie Rouen Normandie - UNIROUEN - Université de Rouen Normandie - NU - Normandie Université - IRIHS - Institut de Recherche Interdisciplinaire Homme et Société - UNIROUEN - Université de Rouen Normandie - NU - Normandie Université)

  • Natacha Raffin

    (ENS Paris Saclay - Ecole Normale Supérieure Paris-Saclay)

Abstract

In this article, we compare a tax and a standard as environmental tools depending on firms' R&D strategy and the government's ability to credibly commit to its policy. We consider a duopoly model where production is polluting and in an effort to mitigate emissions, firms invest in green R&D (in the presence of technological spillovers) either cooperatively or non-cooperatively. We explore two policy games in which the regulator establishes an emission tax or an emission standard either before or after firms engage in R&D. We endogenize both the firms' R&D strategy and the regulator's choice of policy instrument. We find that when firms choose not to cooperate, an emission standard is socially preferable. Conversely, a tax is the better choice when firms collaborate in green R&D.

Suggested Citation

  • Marie-Laure Cabon-Dhersin & Natacha Raffin, 2023. "Cooperation in Green R&D and Environmental Policies: Taxes or Standards," Working Papers hal-03610541, HAL.
    • Handle: RePEc:hal:wpaper:hal-03610541
    Note: View the original document on HAL open archive server: https://normandie-univ.hal.science/hal-03610541v3
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    References listed on IDEAS

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    Keywords

    R&D Cooperation; Spillovers; taxes; standards; Cournot competition; Policy games;
    All these keywords.

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