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On the Incentives Created by Policy Instruments to Adopt Advanced Abatement Technology if Firms are Asymmetric

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  • Till Requate
  • Wolfram Uunold

Abstract

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.

Suggested Citation

  • Till Requate & Wolfram Uunold, 2001. "On the Incentives Created by Policy Instruments to Adopt Advanced Abatement Technology if Firms are Asymmetric," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 157(4), pages 536-554, December.
  • Handle: RePEc:mhr:jinste:urn:sici:0932-4569(200112)157:4_536:oticbp_2.0.tx_2-x
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    References listed on IDEAS

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    1. Laffont, Jean-Jacques & Tirole, Jean, 1996. "Pollution permits and compliance strategies," Journal of Public Economics, Elsevier, vol. 62(1-2), pages 85-125, October.
    2. 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.
    3. Biglaiser, Gary & Horowitz, John K & Quiggin, John, 1995. "Dynamic Pollution Regulation," Journal of Regulatory Economics, Springer, vol. 8(1), pages 33-44, July.
    4. 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.
    5. 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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    More about this item

    JEL classification:

    • L5 - Industrial Organization - - Regulation and Industrial Policy
    • Q2 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy

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