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Joint Management of Emission Abatement and Technological Innovation for Stock Externalities

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  • Marc Baudry

Abstract

We investigate how emission abatement and technological innovation provide different solutions to reduce pollutant emissions. In the case of a stock externality emission abatement leads to a smooth and continuous adjustment of emissions. Conversely, technological innovation has to be interpreted as an option on a less polluted environment and can justify the use of a pollution threshold above which it is optimal to start a research and development programme for a less polluting technology. It is shown that technological innovation interferes with the traditional emission abatement approach. The optimal abatement level is logically lowered once the less polluting technology is available; nevertheless a temporary increase in emissions is optimal during the research and development period. The usual Pigouvian tax system proves to remain an efficient corrective instrument. A numerical application to the Greenhouse effect is provided. Copyright Kluwer Academic Publishers 2000

Suggested Citation

  • Marc Baudry, 2000. "Joint Management of Emission Abatement and Technological Innovation for Stock Externalities," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 16(2), pages 161-183, June.
  • Handle: RePEc:kap:enreec:v:16:y:2000:i:2:p:161-183
    DOI: 10.1023/A:1008363207732
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    References listed on IDEAS

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    Cited by:

    1. Goeschl, Timo & Perino, Grischa, 2009. "On backstops and boomerangs: Environmental R&D under technological uncertainty," Energy Economics, Elsevier, vol. 31(5), pages 800-809, September.
    2. Ng, Yew-Kwang, 2007. "Eternal Coase and external costs: A case for bilateral taxation and amenity rights," European Journal of Political Economy, Elsevier, vol. 23(3), pages 641-659, September.
    3. Pawlina, Grzegorz & Kort, Peter M., 2005. "Investment under uncertainty and policy change," Journal of Economic Dynamics and Control, Elsevier, vol. 29(7), pages 1193-1209, July.
    4. Kverndokk, Snorre & Rosendahl, Knut Einar & Rutherford, Thomas F., 2004. "Climate policies and induced technological change: Impacts and timing of technology subsidies," Memorandum 05/2004, Oslo University, Department of Economics.
    5. Snorre Kverndokk & Knut Rosendahl & Thomas Rutherford, 2004. "Climate Policies and Induced Technological Change: Which to Choose, the Carrot or the Stick?," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 27(1), pages 21-41, January.
    6. Perino, Grischa & Requate, Till, 2012. "Does more stringent environmental regulation induce or reduce technology adoption? When the rate of technology adoption is inverted U-shaped," Journal of Environmental Economics and Management, Elsevier, vol. 64(3), pages 456-467.
    7. Baudry, Marc, 1999. "Stock externalities and the diffusion of less polluting capital: an option approach," Structural Change and Economic Dynamics, Elsevier, vol. 10(3-4), pages 395-420, December.
    8. Xabadia, Angels & Goetz, Renan-Ulrich & Zilberman, David, 2005. "Technology Adoption by Heterogeneous Producers to Regulate a Stock Externality," 2005 Annual meeting, July 24-27, Providence, RI 19538, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    9. Guiomar Martín-Herrán & Santiago J. Rubio, 2016. "The Strategic Use of Abatement by a Polluting Monopoly," Working Papers 2016.58, Fondazione Eni Enrico Mattei.
    10. Xabadia, Angels & Goetz, Renan U. & Zilberman, David, 2006. "Control of accumulating stock pollution by heterogeneous producers," Journal of Economic Dynamics and Control, Elsevier, vol. 30(7), pages 1105-1130, July.
    11. Baker, Erin & Shittu, Ekundayo, 2008. "Uncertainty and endogenous technical change in climate policy models," Energy Economics, Elsevier, vol. 30(6), pages 2817-2828, November.
    12. Goeschl, Timo & Perino, Grischa, 2007. "Innovation without magic bullets: Stock pollution and R&D sequences," Journal of Environmental Economics and Management, Elsevier, vol. 54(2), pages 146-161, September.
    13. Alan Collins & Richard I. D. Harris, 2002. "Does Plant Ownership Affect the Level of Pollution Abatement Expenditure?," Land Economics, University of Wisconsin Press, vol. 78(2), pages 171-189.
    14. Makropoulou, Vasiliki & Dotsis, George & Markellos, Raphael N., 2013. "Environmental policy implications of extreme variations in pollutant stock levels and socioeconomic costs," The Quarterly Review of Economics and Finance, Elsevier, vol. 53(4), pages 417-428.

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