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Policy-Induced Technology Adoption: Evidence from the U.S. Lead Phasedown

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  • Kerr, Suzi
  • Newell, Richard

    ()
    (Resources for the Future)

Abstract

The theory of environmental regulation suggests that economic instruments, such as taxes and tradable permits, create more effective technology adoption incentives than conventional regulatory standards. We explore this issue for an important industry undergoing technological responses to a dramatic decrease in allowed pollution levels—the petroleum industry’s phasedown of lead in gasoline. Using a panel of refineries from 1971 to 1995, we provide some of the first direct evidence that alternative policies affect the pattern of adoption in expected ways. Importantly, we find that the tradable permit system used during the lead phasedown provided incentives for more efficient technology adoption decisions. Where environmentally appropriate, this suggests that flexible market-based regulation can achieve environmental goals while providing better incentives for technology diffusion.

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Bibliographic Info

Paper provided by Resources For the Future in its series Discussion Papers with number dp-01-14.

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Date of creation: 01 May 2001
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Handle: RePEc:rff:dpaper:dp-01-14

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Keywords: technology; adoption; diffusion; environment; regulation; lead; gasoline; tradable permit; incentive-based policy;

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  1. 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.
  2. Stavins, Robert & Jaffe, Adam & Newell, Richard, 2000. "Technological Change and the Environment," Working Paper Series rwp00-002, Harvard University, John F. Kennedy School of Government.
  3. Nancy L. Rose & Paul L. Joskow, 1988. "The Diffusion of New Technologies: Evidence from the Electric Utility Industry," Working papers 501, Massachusetts Institute of Technology (MIT), Department of Economics.
  4. Geroski, Paul A, 1999. "Models of Technology Diffusion," CEPR Discussion Papers 2146, C.E.P.R. Discussion Papers.
  5. Nelson, Randy A & Tietenberg, Tom & Donihue, Michael R, 1993. "Differential Environmental Regulation: Effects on Electric Utility Capital Turnover and Emissions," The Review of Economics and Statistics, MIT Press, vol. 75(2), pages 368-73, May.
  6. Levin, Sharon G & Levin, Stanford L & Meisel, John B, 1987. "A Dynamic Analysis of the Adoption of a New Technology: The Case of Optical Scanners," The Review of Economics and Statistics, MIT Press, vol. 69(1), pages 12-17, February.
  7. Garth Saloner & Andrea Shepard, 1995. "Adoption of Technologies with Network Effects: An Empirical Examination of the Adoption of Teller Machines," RAND Journal of Economics, The RAND Corporation, vol. 26(3), pages 479-501, Autumn.
  8. Fischer, Carolyn & Parry, Ian W. H. & Pizer, William A., 2003. "Instrument choice for environmental protection when technological innovation is endogenous," Journal of Environmental Economics and Management, Elsevier, vol. 45(3), pages 523-545, May.
  9. Richard G. Newell & Adam B. Jaffe & Robert N. Stavins, 1999. "The Induced Innovation Hypothesis And Energy-Saving Technological Change," The Quarterly Journal of Economics, MIT Press, vol. 114(3), pages 941-975, August.
  10. Kiefer, Nicholas M, 1988. "Economic Duration Data and Hazard Functions," Journal of Economic Literature, American Economic Association, vol. 26(2), pages 646-79, June.
  11. Jaffe Adam B. & Stavins Robert N., 1995. "Dynamic Incentives of Environmental Regulations: The Effects of Alternative Policy Instruments on Technology Diffusion," Journal of Environmental Economics and Management, Elsevier, vol. 29(3), pages S43-S63, November.
  12. Timothy H. Hannan & John M. McDowell, 1984. "The Determinants of Technology Adoption: The Case of the Banking Firm," RAND Journal of Economics, The RAND Corporation, vol. 15(3), pages 328-335, Autumn.
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