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Strategic Environmental Policy, Clean Technologies and the Learning Curve

  • Eberhard Feess

    ()

  • Gerd Muehlheusser

    ()

In the political discussion, it is often emphasized that the environmental service industry (which produces a clean factor of production) benefits from an early and strong environmental policy. This is especially likely if the costs of production are decreasing over time due to learning curve effects. Surprisingly, the environmental service industry has not been integrated into the theory of strategic environmental policy yet. Our main question is whether a national leadership in environmental policy can pay off if profits of the environmental service industry are taken into account. We consider a two-period model with one firm in each country competing on a third market. Emissions can be substituted by the clean factor when deciding upon the production technology. The unit costs of producing the clean factor in the second period are decreasing in the quantity produced in the initial period. We derive the optimal environmental policy for both periods from a national point of view and show that the presence of the environmental service industry can indeed lead to a national leadership in pollution control. Copyright Kluwer Academic Publishers 2002

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File URL: http://hdl.handle.net/10.1023/A:1021249404533
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Article provided by European Association of Environmental and Resource Economists in its journal Environmental and Resource Economics.

Volume (Year): 23 (2002)
Issue (Month): 2 (October)
Pages: 149-166

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Handle: RePEc:kap:enreec:v:23:y:2002:i:2:p:149-166
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  1. Adam B. Jaffe & Karen Palmer, 1996. "Environmental Regulation and Innovation: A Panel Data Study," NBER Working Papers 5545, National Bureau of Economic Research, Inc.
  2. Kresimir Zigic, 2001. "Strategic Trade Policy, Spillovers, and the Uncertain Mode of," Industrial Organization 0012008, EconWPA.
  3. James A. Brander, 1995. "Strategic Trade Policy," NBER Working Papers 5020, National Bureau of Economic Research, Inc.
  4. S. Baranzoni & P. Bianchi & L. Lambertini, 2000. "Market Structure," Working Papers 368, Dipartimento Scienze Economiche, Universita' di Bologna.
  5. Ulph, Alistair, 1998. "Political institutions and the design of environmental policy in a federal system with asymmetric information," European Economic Review, Elsevier, vol. 42(3-5), pages 583-592, May.
  6. Bandyopadhyay, Subhayu, 1997. "Demand elasticities, asymmetry and strategic trade policy," Journal of International Economics, Elsevier, vol. 42(1-2), pages 167-177, February.
  7. Wilhelm Althammer & Wolfgang Bucholz, 1999. "Distorting Environmental Taxes: The Role of the Market Structure," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), Justus-Liebig University Giessen, Department of Statistics and Economics, vol. 219(3+4), pages 257-270, September.
  8. Johann Wackerbauer, 1995. "Struktur und Wettbewerbssituation der Anbieter von Umwelttechnik und unweltfreundlicher Technik," Ifo Schnelldienst, Ifo Institute for Economic Research at the University of Munich, vol. 48(21), pages 07-14, October.
  9. Niels Nannerup, 1998. "Strategic Environmental Policy Under Incomplete Information," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 11(1), pages 61-78, January.
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