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Auctioning green investment grants as a means of accelerating environmental innovation

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  • Cesare Dosi
  • Michèle Moretto

Abstract

[eng] Besicles uncertainty about on-going private benefits, voluntary abandonment of a polluting technology may be (further) delayed if switching costs are expected to decline over time, because of positive extemalities stemming from the diffusion of the new (« green ») production process. In this paper we examine the implications of these sources of inertia on the design of investment grants aimed at accelerating environmental innovation. We show that although « network externalities » tend to decelerate spontaneous (decentralized) technological change, they provide the regulator with the opportunity of saving public funds, by targeting grants to agent(s) with lower switching costs, instead of subsidizing the entire industry indiscriminately. [fre] Outre les incertitudes relatives aux bénéfices privés, l'abandon volontaire d'une technologie polluante peut être ultérieurement retardé par la perspective d'une réduction des coûts d'investissement liée à la diffusion du nouveau mode de production. Dans cet article, seront analysées les implications de ces sources d'inertie sur la conception d'aides publiques à l'investissement ayant pour but d'accélérer l'adoption de technologies vertes. Bien que la perspective d'une réduction des coûts d'investissement tende à ralentir le changement technologique spontané, il sera montré que l'existence d'effets externes positifs, liés à la diffusion du nouveau mode de production, offre au régulateur la possibilité de réduire les dépenses publiques en octroyant les subventions aux entreprises ayant des coûts inférieurs d'innovation, au lieu de subventionner, sans discrimination, tout le secteur concerné.

Suggested Citation

  • Cesare Dosi & Michèle Moretto, 1998. "Auctioning green investment grants as a means of accelerating environmental innovation," Revue d'Économie Industrielle, Programme National Persée, vol. 83(1), pages 99-110.
  • Handle: RePEc:prs:recind:rei_0154-3229_1998_num_83_1_1702
    Note: DOI:10.3406/rei.1998.1702
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    Cited by:

    1. Cesare Dosi & Michele Moretto, 2010. "Environmental Innovation, War Of Attrition And Investment Grants," International Game Theory Review (IGTR), World Scientific Publishing Co. Pte. Ltd., vol. 12(01), pages 37-59.
    2. Moretto, Michele, 2008. "Competition and irreversible investments under uncertainty," Information Economics and Policy, Elsevier, vol. 20(1), pages 75-88, March.
    3. Moretto, Michele, 2000. "Irreversible investment with uncertainty and strategic behavior," Economic Modelling, Elsevier, vol. 17(4), pages 589-617, December.

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