Strictness of Environmental Policy and Investment in Abatement
AbstractIn this paper we model an oligopoly where .rms invest in abatement technologies and emissions are taxed by the government. We show that a stricter environmental policy does not necessarily lead to an increase in .rms.R&D investment into cleaner production methods. In fact, the emission-to-output ratio may be a U-shaped function of the environmental damage parameter. This result holds both when the government can commit and in the social optimum. When the government cannot commit, this relationship is ambiguous except in markets with few .rms. Our results further suggest that if the emission-to-output ratio is decreasing throughout, output is a U-shaped function of the environmental damage.
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Bibliographic InfoPaper provided by Department of Economics, University of Leicester in its series Discussion Papers in Economics with number 11/35.
Date of creation: Jul 2011
Date of revision:
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Find related papers by JEL classification:
- L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
- Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation
- Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-02-01 (All new papers)
- NEP-ENE-2012-02-01 (Energy Economics)
- NEP-ENV-2012-02-01 (Environmental Economics)
- NEP-INO-2012-02-01 (Innovation)
- NEP-REG-2012-02-01 (Regulation)
- NEP-RES-2012-02-01 (Resource Economics)
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.:
- Elias Asproudis & Maria José Gil-Moltó, 2009. "Technological choice under environmentalists’ participation in Emissions Trading Systems," Discussion Papers in Economics, Department of Economics, University of Leicester 09/9, Department of Economics, University of Leicester.
- Milliman, Scott R. & Prince, Raymond, 1989. "Firm incentives to promote technological change in pollution control," Journal of Environmental Economics and Management, Elsevier, vol. 17(3), pages 247-265, November.
- Jung, Chulho & Krutilla, Kerry & Boyd, Roy, 1996. "Incentives for Advanced Pollution Abatement Technology at the Industry Level: An Evaluation of Policy Alternatives," Journal of Environmental Economics and Management, Elsevier, vol. 30(1), pages 95-111, January.
- Downing, Paul B. & White, Lawrence J., 1986. "Innovation in pollution control," Journal of Environmental Economics and Management, Elsevier, vol. 13(1), pages 18-29, March.
- Requate, Till & Unold, Wolfram, 2003. "Environmental policy incentives to adopt advanced abatement technology:: Will the true ranking please stand up?," European Economic Review, Elsevier, Elsevier, vol. 47(1), pages 125-146, February.
- Requate, Till, 2005. "Dynamic incentives by environmental policy instruments--a survey," Ecological Economics, Elsevier, Elsevier, vol. 54(2-3), pages 175-195, August.
- 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.
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