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Incentives to invest in abatement technology. A tax versus emissions trading under imperfect competition

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Abstract

In the longer run, effects on R&D and the implementation of advanced abatement technology may be at least as important as short-run cost effectiveness when we evaluate public environmental policy. In this paper, we show that the number of firms that adopt advanced abatement technology could be higher with emissions trading than with a tax if there is imperfect competition in the permits market. Under perfect competition, the number would always be higher with a tax, given that the regulator is myopic. If we allow for environmental policy response, the ranking is still ambiguous under imperfect competition, while the regimes become equal with perfect competition.

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  • Halvor Briseid Storrøsten, 2010. "Incentives to invest in abatement technology. A tax versus emissions trading under imperfect competition," Discussion Papers 606, Statistics Norway, Research Department.
    • Handle: RePEc:ssb:dispap:606
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    File URL: https://www.ssb.no/a/publikasjoner/pdf/DP/dp606.pdf
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    Cited by:

    1. Francisco J. André and Carmen Arguedas, 2018. "Technology Adoption in Emission Trading Programs with Market Power," The Energy Journal, International Association for Energy Economics, vol. 0(Special I).
    2. Bingxin Zeng & Lei Zhu, 2019. "Market Power and Technology Diffusion in an Energy-Intensive Sector Covered by an Emissions Trading Scheme," Sustainability, MDPI, vol. 11(14), pages 1-18, July.

    More about this item

    Keywords

    Auctioned permits; Emissions taxes; technology adoption; Cournot competition;
    All these keywords.

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • 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

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