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Incentives for Green R&D in a Dirty Industry under Price Competition

Author

Listed:
  • Indrani Roy chowdhury

    () (Jamia Millia islamia)

Abstract

In an oligopolistic framework with price competition, we examine the effect of abatement taxes, as well as emission caps on the incentives for adopting a green technology. We identify two new strategic effects, namely the relative efficiency effect, and the competition softening effect, that affect the incentive for green R&D. Under an abatement tax, R&D incentives increase whenever the new technology is non-drastic, and the demand function is either approximately linear, or not too elastic. Another sufficient condition is that the market size be sufficiently large. With emission caps, the result depends on how green the new technology is.

Suggested Citation

  • Indrani Roy chowdhury, 2009. "Incentives for Green R&D in a Dirty Industry under Price Competition," Economics Bulletin, AccessEcon, vol. 29(3), pages 2265-2274.
  • Handle: RePEc:ebl:ecbull:eb-09-00425
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    File URL: http://www.accessecon.com/Pubs/EB/2009/Volume29/EB-09-V29-I3-P72.pdf
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    References listed on IDEAS

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    1. Xepapadeas, Anastasios & de Zeeuw, Aart, 1999. "Environmental Policy and Competitiveness: The Porter Hypothesis and the Composition of Capital," Journal of Environmental Economics and Management, Elsevier, vol. 37(2), pages 165-182, March.
    2. Tasnadi, Attila, 1999. "Existence of pure strategy Nash equilibrium in Bertrand-Edgeworth oligopolies," Economics Letters, Elsevier, vol. 63(2), pages 201-206, May.
    3. Mohr, Robert D., 2002. "Technical Change, External Economies, and the Porter Hypothesis," Journal of Environmental Economics and Management, Elsevier, vol. 43(1), pages 158-168, January.
    4. Karen Palmer & Wallace E. Oates & Paul R. Portney, 1995. "Tightening Environmental Standards: The Benefit-Cost or the No-Cost Paradigm?," Journal of Economic Perspectives, American Economic Association, vol. 9(4), pages 119-132, Fall.
    5. Indrani, Roy Chowdhury, 2006. "Re-visiting the Porter Hypothesis," MPRA Paper 7899, University Library of Munich, Germany.
    6. Simpson, R. David & Bradford, Robert III, 1996. "Taxing Variable Cost: Environmental Regulation as Industrial Policy," Journal of Environmental Economics and Management, Elsevier, vol. 30(3), pages 282-300, May.
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    Citations

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    Cited by:

    1. Prabal Roy Chowdhury, 2011. "The Porter hypothesis and hyperbolic discounting," Economics Bulletin, AccessEcon, vol. 31(1), pages 167-176.
    2. Indrani Roy Chowdhury & Sandwip K. Das, 2011. "Environmental regulation, green R&D and the Porter hypothesis," Indian Growth and Development Review, Emerald Group Publishing, vol. 4(2), pages 142-152, September.

    More about this item

    Keywords

    Abatement tax; emission caps; environmental policy; green R&D; price competition.;

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue

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