On the Incentives Created by Policy Instruments to Adopt Advanced Abatement Technology if Firms are Asymmetric
The paper investigates the incentives created by environmental policy instruments to adopt cleaner technology. In a framework with many asymmetric firms we show that, if the regulator has committed to a certain aggregate emission level before the new technology was available, taxes lead to overinvestment, while both auctioned and free permits lead to underinvestment. If, however, the regulator knows the new technology, he is able to induce the socially optimal degree of adoption independently of whether he moves before or after adoption.
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Volume (Year): 157 (2001)
Issue (Month): 4 (December)
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References listed on IDEAS
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- Laffont, Jean-Jacques & Tirole, Jean, 1994.
"Pollution Permits and Compliance Strategies,"
IDEI Working Papers
39, Institut d'Économie Industrielle (IDEI), Toulouse.
- Downing, Paul B. & White, Lawrence J., 1986. "Innovation in pollution control," Journal of Environmental Economics and Management, Elsevier, vol. 13(1), pages 18-29, March.
- Biglaiser, Gary & Horowitz, John K & Quiggin, John, 1995. "Dynamic Pollution Regulation," Journal of Regulatory Economics, Springer, vol. 8(1), pages 33-44, July.
- Kennedy, Peter W. & Laplante, Benoit, 2000. "Environmental policy and time consistency - emissions taxes and emissions trading," Policy Research Working Paper Series 2351, The World Bank.
- Jung, Chulho & Krutilla, Kerry & Boyd, Roy, 1996. "Incentives for Advanced Pollution Abatement Technology at the Industry Level: An Evaluation of Policy Alternatives," Journal of Environmental Economics and Management, Elsevier, vol. 30(1), pages 95-111, January.
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