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Timing of adoption of clean technologies, transboundary pollution and international trade

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  • Ben Jebli, Mehdi
  • Ben Youssef, Slim

Abstract

We consider a symmetric model composed of two countries and a firm in each country. Firms produce the same good by means of a polluting technology that uses fossil energy. However, these firms can adopt a clean technology that uses a renewable energy and that has a lower unit cost. Surprisingly, opening markets to international competition increases the per-unit emission-tax and decreases the per-unit production subsidy. Interestingly, the socially-optimal adoption date under a common market better internalizes transboundary pollution than that under autarky, and than the optimal adoption date of regulated firms. However, the optimal adoption date of non-regulated firms completely don't internalize transboundary pollution. In autarky (resp. a common market), regulated firms adopt earlier (resp. later) than what is socially-optimal, whereas non-regulated firms adopt later than the socially-optimal adoption date and than the optimal adoption date of regulated firms. Therefore, in autarky (resp. a common market) regulators can induce firms to adopt at the socially-optimal adoption date by giving them postpone ( resp. speed up) adoption subsidies. Opening markets to international trade, speeds up the socially-optimal adoption date and delays optimal adoption dates of regulated and non-regulated firms.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 42467.

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Date of creation: Nov 2012
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Handle: RePEc:pra:mprapa:42467

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Keywords: Regulation; Adoption date; Renewable energy; Transboundary pollution; Common market;

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