Environmental Policy and Incentives to Invest in Advanced Abatement Technology if Arrival of Future Technology is Uncertain - Extended Version
AbstractWe study long-term incentives for polluting and regulated firms to invest in advanced abatement technologies, when some new technology is available but an even better technology will be expected in the future. Firms can invest only once. We find that depending on the adoption fixed costs all possible combinations of investment patters can occur in social optimum. Further we show that if the regulator anticipates the arrival of the new technology he can decentralize socially optimal allocation by charging Pigouvian tax or issuing tradable permits through announcing his policy and setting ex post optimal policy levels, after firms have invested. --
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Bibliographic InfoPaper provided by Christian-Albrechts-University of Kiel, Department of Economics in its series Economics Working Papers with number 2007,04.
Date of creation: 2007
Date of revision:
Emission taxes; tradable permits; option value theory; uncertainty; Poisson distribution;
Find related papers by JEL classification:
- Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation
- L5 - Industrial Organization - - Regulation and Industrial Policy
- O31 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-05-12 (All new papers)
- NEP-ENE-2007-05-12 (Energy Economics)
- NEP-ENV-2007-05-12 (Environmental Economics)
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