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Green Technology and Optimal Emissions Taxation

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  • STUART McDONALD
  • JOANNA POYAGO-THEOTOKY

Abstract

We examine the impact of an optimal emissions tax on research and development of emission reducing green technology (E-R&D) in the presence of R&D spillovers. We show that the size and effectiveness of the optimal emissions tax depends on the type of the R&D spillover: input or output spillover. In the case of R&D input spillovers (where only knowledge spillovers are accounted for), the optimal emissions tax required to stimulate R&D is always higher than when there is an R&D output spillover (where abatement and knowledge spillovers exist simultaneously). We also find that optimal emissions taxation and cooperative R&D complement each other when R&D spillovers are small, leading to lower emissions.
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Suggested Citation

  • STUART McDONALD & JOANNA POYAGO-THEOTOKY, 2017. "Green Technology and Optimal Emissions Taxation," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 19(2), pages 362-376, April.
    • Handle: RePEc:bla:jpbect:v:19:y:2017:i:2:p:362-376
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    File URL: http://hdl.handle.net/10.1111/jpet.2017.19.issue-2
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    Cited by:

    1. Jiaping Xie & Jing Li & Ling Liang & Xu Fang & Guang Yang & Lihong Wei, 2020. "Contracting Emissions Reduction Supply Chain Based on Market Low-Carbon Preference and Carbon Intensity Constraint," Asia-Pacific Journal of Operational Research (APJOR), World Scientific Publishing Co. Pte. Ltd., vol. 37(02), pages 1-34, March.
    2. Ahmed Kouider Aissa & Alessandro Tampieri, 2025. "Green Consumers and the Transition to Sustainable Production," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 88(11), pages 3151-3185, November.
    3. Marie-Laure Cabon-Dhersin & Natacha Raffin, 2024. "Cooperation in green R &D and environmental policies: tax or standard," Journal of Regulatory Economics, Springer, vol. 66(2), pages 205-237, December.
    4. Hirose, Kosuke & Matsumura, Toshihiro, 2025. "Optimal energy-saving investments and Jevons Paradox in duopoly markets," Energy Economics, Elsevier, vol. 147(C).
    5. Soo Keong Yong & Lana Friesen & Stuart McDonald, 2018. "Emission Taxes, Clean Technology Cooperation, And Product Market Collusion: Experimental Evidence," Economic Inquiry, Western Economic Association International, vol. 56(4), pages 1950-1979, October.
    6. Ye Duan & Nan Li & Hailin Mu & Shusen Gui, 2017. "Research on CO 2 Emission Reduction Mechanism of China’s Iron and Steel Industry under Various Emission Reduction Policies," Energies, MDPI, vol. 10(12), pages 1-24, December.
    7. Adriana Gama & Isabelle Maret & Virginie Masson, 2019. "Endogenous heterogeneity in duopoly with deterministic one-way spillovers," Annals of Finance, Springer, vol. 15(1), pages 103-123, March.
    8. Soo Keong Yong & Stuart McDonald, 2018. "Emissions tax and second-mover advantage in clean technology R&D," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 20(1), pages 89-108, January.
    9. Iannucci, Gianluca & Tampieri, Alessandro, 2023. "On the evolutionary interplay between environmental CSR and emission tax," Energy Economics, Elsevier, vol. 128(C).
    10. Rabah Amir & Adriana Gama & Katarzyna Werner, 2018. "On Environmental Regulation of Oligopoly Markets: Emission versus Performance Standards," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 70(1), pages 147-167, May.
    11. Hirose, Kosuke & Matsumura, Toshihiro, 2023. "Green transformation in oligopoly markets under common ownership," Energy Economics, Elsevier, vol. 126(C).
    12. Seung-Leul Kim & Sang-Ho Lee, 2014. "Eco-Technology Licensing under Emission Tax: Royalty vs. Fixed-Fee," Korean Economic Review, Korean Economic Association, vol. 30, pages 273-300.
    13. Yanfang Zhang & Qianwen Tan & Yuchang Ji, 2023. "Input subsidy versus output subsidy for green R&D in a supply chain," Journal of International Development, John Wiley & Sons, Ltd., vol. 35(1), pages 97-126, January.
    14. Wang, Chenyu & Atallah, Gamal, 2025. "Carbon tax in a duopoly with asymmetric spillovers and symmetric contributions," Economic Modelling, Elsevier, vol. 148(C).
    15. Lambertini, Luca & Pignataro, Giuseppe & Tampieri, Alessandro, 2020. "The effects of environmental quality misperception on investments and regulation," International Journal of Production Economics, Elsevier, vol. 225(C).
    16. Chiu Yu Ko & Bo Shen & Xuyao Zhang, 2023. "Can corruption encourage clean technology transfer?," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 25(3), pages 459-492, June.
    17. Moner-Colonques, R. & Rubio, S., 2015. "The timing of environmental policy in a duopolistic market," Economia Agraria y Recursos Naturales, Spanish Association of Agricultural Economists, vol. 15(01).
    18. Chen, Hung-Yi & Yang, Ya-Po & Hu, Jin-Li, 2023. "Environmental taxes under mixed duopoly: The roles of privatization and foreign eco-technology," Economic Modelling, Elsevier, vol. 126(C).
    19. Yasunori Ouchida & Daisaku Goto, 2022. "Strategic non‐use of the government's precommitment ability for emissions taxation: Environmental R&D formation in a Cournot duopoly," Australian Economic Papers, Wiley Blackwell, vol. 61(1), pages 181-206, March.
    20. Marie-Laure Cabon-Dhersin & Natacha Raffin, 2023. "Cooperation in Green R&D and Environmental Policies: Taxes or Standards," Working Papers hal-03610541, HAL.
    21. Ioanna Pantelaiou & Panos Hatzipanayotou & Panagiotis Konstantinou & Anastasios Xepapadeas, 2020. "Can Cleaner Environment Promote International Trade? Environmental Policies as Export Promoting Mechanisms," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 75(4), pages 809-833, April.
    22. Jiayi Sun & Deqing Tan, 2023. "Non-cooperative Mode, Cost-Sharing Mode, or Cooperative Mode: Which is the Optimal Mode for Desertification Control?," Computational Economics, Springer;Society for Computational Economics, vol. 61(3), pages 975-1008, March.
    23. Zigan Lin & Pengfei Liu, 2024. "Research on Emission Reduction Decisions in Supply Chains Considering Vertical Spillover Effects and Low-Carbon Preferences," Sustainability, MDPI, vol. 16(22), pages 1-26, November.

    More about this item

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation

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