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A Tale of Two Market Failures: Technology and Environmental Policy

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Author Info
Stavins, Robert
Jaffe, Adam
Newell, Richard () (Resources for the Future)

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Abstract

Market failures associated with environmental pollution interact with market failures associated with the innovation and diffusion of new technologies. These combined market failures provide a strong rationale for a portfolio of public policies that foster emissions reduction as well as the development and adoption of environmentally beneficial technology. Both theory and empirical evidence suggest that the rate and direction of technological advance is influenced by market and regulatory incentives, and can be cost-effectively harnessed through the use of economicincentive based policy. In the presence of weak or nonexistent environmental policies, investments in the development and diffusion of new environmentally beneficial technologies are very likely to be less than would be socially desirable. Positive knowledge and adoption spillovers and information problems can further weaken innovation incentives. While environmental technology policy is fraught with difficulties, a long-term view suggests a strategy of experimenting with policy approaches and systematically evaluating their success.

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Paper provided by Resources For the Future in its series Discussion Papers with number dp-04-38.

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Date of creation: 22 Oct 2004
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Handle: RePEc:rff:dpaper:dp-04-38

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Related research
Keywords: technology; research and development; environment; externality; policy;

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Find related papers by JEL classification:
O38 - Economic Development, Technological Change, and Growth - - Technological Change - - - Government Policy
Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy
H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies

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References listed on IDEAS
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.:
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    Other versions:
  6. Adam B. Jaffe & Richard G. Newell & Robert N. Stavins, 2000. "Technological Change and the Environment," NBER Working Papers 7970, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  7. Griliches, Zvi, 1992. " The Search for R&D Spillovers," Scandinavian Journal of Economics, Blackwell Publishing, vol. 94(0), pages S29-47, Supplemen.
    Other versions:
  8. Austan Goolsbee, 1998. "Does Government R&D Policy Mainly Benefit Scientists and Engineers?," NBER Working Papers 6532, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  9. N. Gregory Mankiw & Michael D. Whinston, 1986. "Free Entry and Social Inefficiency," RAND Journal of Economics, The RAND Corporation, vol. 17(1), pages 48-58, Spring. [Downloadable!] (restricted)
  10. Fischer, Carolyn & Newell, Richard, 2004. "Environmental and Technology Policies for Climate Mitigation," Discussion Papers dp-04-05, Resources For the Future. [Downloadable!]
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  11. Dubin, Jeffrey A. & Henson, Steven E., 1988. "The distributional effects of the Federal Energy Tax Act," Resources and Energy, Elsevier, vol. 10(3), pages 191-212, September. [Downloadable!] (restricted)
  12. Dubin, Jeffrey A. & Henson, Steven E., 1988. "The Distributional Effects of the Federal Energy Tax Act," Working Papers 674, California Institute of Technology, Division of the Humanities and Social Sciences. [Downloadable!]
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Cited by:
(explanations, 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.)

  1. Pierre Desrochers, 2008. "Did the Invisible Hand Need a Regulatory Glove to Develop a Green Thumb? Some Historical Perspective on Market Incentives, Win-Win Innovations and the Porter Hypothesis," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 41(4), pages 519-539, December. [Downloadable!] (restricted)
  2. Javier Carrillo & Pablo Del Rio, 2007. "An Empirical Analysis of Institutional Barriers to European Hydrogen Rd&D Cooperation," Working Papers Economia wp07-13, Instituto de Empresa, Area of Economic Environment. [Downloadable!]
    Other versions:
  3. Lori Bennear & Robert Stavins, 2007. "Second-best theory and the use of multiple policy instruments," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 37(1), pages 111-129, May. [Downloadable!] (restricted)
  4. Massimiliano Mazzanti & Roberto Zoboli, 2006. "Examining the Factors Influencing Environmental Innovations," Working Papers 2006.20, Fondazione Eni Enrico Mattei. [Downloadable!]
  5. Thierry Bréchet & Pierre-André Jouvet, 2007. "A note the cost of pollution abatement," EconomiX Working Papers 2007-15, University of Paris West - Nanterre la Défense, EconomiX. [Downloadable!]
  6. Christoph Heinzel & Ralph Winkler, 2007. "The role of environmental and technology policies in the transition to a low-carbon energy industry," Economics working paper series 07/71, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich. [Downloadable!]
  7. Tom-Reiel Heggedal and Karl Jacobsen, 2008. "Timing of innovation policies when carbon emissions are restricted: an applied general equilibrium analysis," Discussion Papers 536, Research Department of Statistics Norway. [Downloadable!]
  8. Fischer, Carolyn & Newell, Richard, 2004. "Environmental and Technology Policies for Climate Mitigation," Discussion Papers dp-04-05, Resources For the Future. [Downloadable!]
    Other versions:
  9. Stavins, Robert N. & Jaffe, Judson & Schatzki, Todd, 2007. "Too Good to Be True? Three Economic Assessments of California Climate Change Policy," Discussion Papers dp-07-12, Resources For the Future. [Downloadable!]
  10. Daiju Narita, 2009. "Economic Optimality of CCS Use: A Resource-Economic Model," Kiel Working Papers 1508, Kiel Institute for the World Economy. [Downloadable!]
  11. Pablo del Río, 2009. "Assessing the dynamic efficiency of internal mitigation projects. An evolutionary perspective," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 14(3), pages 203-213, March. [Downloadable!] (restricted)
  12. Stefan Ambec & Paul Lanoie, 2007. "When and Why Does It Pay To Be Green?," CIRANO Working Papers 2007s-20, CIRANO. [Downloadable!]
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  13. Reyer Gerlagh & Snorre Kverndokk & Knut Einar Rosendah, 2008. "Linking Environmental and Innovation Policy," Working Papers 2008.53, Fondazione Eni Enrico Mattei. [Downloadable!]
    Other versions:
  14. Stephen Pavelin & Lynda Porter, 2008. "The Corporate Social Performance Content of Innovation in the U.K," Journal of Business Ethics, Springer, vol. 80(4), pages 711-725, July. [Downloadable!] (restricted)
  15. Stavins, Robert, 2007. "Addressing Climate Change with a Comprehensive U.S. Cap-and-Trade System," Working Paper Series rwp07-053, Harvard University, John F. Kennedy School of Government. [Downloadable!]
    Other versions:
  16. Newell, Richard & Wilson, Nathan, 2005. "Technology Prizes for Climate Change Mitigation," Discussion Papers dp-05-33, Resources For the Future. [Downloadable!]
  17. Crespi Francesco & Costantini Valeria, 2007. "Environmental regulation and the export dynamics of energy technologies," Dipartimento di Economia "S. Cognetti de Martiis" LEI & BRICK - Laboratorio di economia dell'innovazione "Franco Momigliano", Bureau of Research in Innovation, Complexity and Knowledge, Collegio Carlo 200708, University of Turin. [Downloadable!]
    Other versions:
  18. Stavins, Robert & Jaffe, Judson & Schatski, Todd, 2007. "Too Good to Be True? An Examination of Three Economic Assessments of California Climate Change Policy," Working Paper Series rwp07-016, Harvard University, John F. Kennedy School of Government. [Downloadable!]
    Other versions:
  19. Pizer, William A., 2006. "Economics versus Climate Change," Discussion Papers dp-06-04, Resources For the Future. [Downloadable!]
  20. Hammar, Henrik & Löfgren, Åsa, 2007. "Explaining adoption of end of pipe solutions and clean technologies," Working Paper 102, National Institute of Economic Research. [Downloadable!]
  21. Enrica De Cian, 2006. "International Technology Spillovers in Climate-Economy Models: Two Possible Approaches," Working Papers 2006.141, Fondazione Eni Enrico Mattei. [Downloadable!]
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