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Innovation Under the Threat of Stricter Environmental Standards

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  • Olivier Cadot
  • Bernard Sinclair-Desgagné

Abstract

This paper considers the threat of stricter regulation as a policy instrument to enhance innovation into cleaner technology. It is argued that in some contexts the government would find it optimal to regulate with positive probability but not with certainty. In those contexts the optimal policy is indeed made of regulatory threats; furthermore, we show that it is time-consistent, credible, involving little information, and immune to ex post renegotiation. Ce document considère la menace d'une réglementation environnementale plus stricte en tant qu'instrument de politique économique visant à stimuler l'innovation. Il est démontré que, dans certains cas, le gouvernement préférerait réglementer avec une probabilité positive pas avec certitude. Dans ces situations, la politique optimale est en effet constituée de menaces de réglementation ; il est de plus démontré qu'elle est cohérente dans le temps, crédible, peu exigeante en information et robuste à la renégociation.

Suggested Citation

  • Olivier Cadot & Bernard Sinclair-Desgagné, 1995. "Innovation Under the Threat of Stricter Environmental Standards," CIRANO Working Papers 95s-11, CIRANO.
  • Handle: RePEc:cir:cirwor:95s-11
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    File URL: http://www.cirano.qc.ca/files/publications/95s-11.pdf
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Jaffe, Adam B. & Newell, Richard G. & Stavins, Robert N., 2003. "Chapter 11 Technological change and the environment," Handbook of Environmental Economics,in: K. G. Mäler & J. R. Vincent (ed.), Handbook of Environmental Economics, edition 1, volume 1, chapter 11, pages 461-516 Elsevier.
    2. Ioulia Ossokina & Otto Swank, 2008. "Adoption Subsidy Versus Technology Standards Under Asymmetric Information," De Economist, Springer, vol. 156(3), pages 241-267, September.
    3. Popp, David & Newell, Richard G. & Jaffe, Adam B., 2010. "Energy, the Environment, and Technological Change," Handbook of the Economics of Innovation, Elsevier.
    4. Stavins, Robert & Jaffe, Adam & Newell, Richard, 2000. "Technological Change and the Environment," Working Paper Series rwp00-002, Harvard University, John F. Kennedy School of Government.
    5. Mohr, Robert D., 2006. "Environmental performance standards and the adoption of technology," Ecological Economics, Elsevier, vol. 58(2), pages 238-248, June.
    6. Adam Jaffe & Richard Newell & Robert Stavins, 2002. "Environmental Policy and Technological Change," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 22(1), pages 41-70, June.

    More about this item

    Keywords

    Environmental regulation; Innovation; Réglementation environnementale ; Innovation;

    JEL classification:

    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • Q2 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation

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