Timing of adoption of clean technologies by regulated monopolies
AbstractWe consider a monopolistic firm producing a good while polluting and using a fossil energy. This firm can adopt a clean technology by incurring an investment cost decreasing exponentially with the adoption date. This clean technology does not pollute and has a lower production cost because it uses a renewable energy. We determine the optimal adoption date for the firm in the case where it is not regulated at all, and in the case where it is regulated at each period of time i.e. the regulator looks for static social optimality. Interestingly, the regulated firm adopts the clean technology earlier than what is socially-optimal. However, the non-regulated firm adopts later than what is socially-optimal. The regulator can induce the firm to adopt at the socially-optimal date by a postpone adoption subsidy. Nevertheless, the regulator may be interested in the earlier adoption of the firm to encourage the diffusion of the use of clean technologies in other industries.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 42470.
Date of creation: Sep 2010
Date of revision: Sep 2012
Static regulation; Clean technology; Renewable energy; Adoption date;
Find related papers by JEL classification:
- H57 - Public Economics - - National Government Expenditures and Related Policies - - - Procurement
- D62 - Microeconomics - - Welfare Economics - - - Externalities
- Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation
- Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
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