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A tale of two market failures: Technology and environmental policy

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Listed author(s):
  • Jaffe, Adam B.
  • Newell, Richard G.
  • Stavins, Robert N.

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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Article provided by Elsevier in its journal Ecological Economics.

Volume (Year): 54 (2005)
Issue (Month): 2-3 (August)
Pages: 164-174

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Handle: RePEc:eee:ecolec:v:54:y:2005:i:2-3:p:164-174
Contact details of provider: Web page: http://www.elsevier.com/locate/ecolecon

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Find related papers by JEL classification:
  • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - 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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  1. Adam B. Jaffe, 2002. "Building Programme Evaluation into the Design of Public Research-Support Programmes," Oxford Review of Economic Policy, Oxford University Press, vol. 18(1), pages 22-34, Spring.
  2. Kevin A. Hassett & Gilbert E. Metcalf, 1992. "Energy Tax Credits and Residential Conservation Investment," NBER Working Papers 4020, National Bureau of Economic Research, Inc.
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  6. Stavins, Robert & Jaffe, Adam & Newell, Richard, 2000. "Technological Change and the Environment," Working Paper Series rwp00-002, Harvard University, John F. Kennedy School of Government.
  7. Jaffe, Adam B. & Newell, Richard G. & Stavins, Robert N., 2003. "Chapter 11 Technological change and the environment," Handbook of Environmental Economics,in: K. G. Mäler & J. R. Vincent (ed.), Handbook of Environmental Economics, edition 1, volume 1, chapter 11, pages 461-516 Elsevier.
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  14. Walsh, Michael J., 1989. "Energy tax credits and housing improvement," Energy Economics, Elsevier, vol. 11(4), pages 275-284, October.
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