The organization of R&D and environmental policy: So does emission subsidy reduce emissions?
This paper reexamines the Poyago-Theotoky model and provides additional investigation that was conducted under a corrected environmental damage parameter. As new findings, we obtain the following. First, social welfare under a time-consistent emission tax (emission subsidy) policy is always welfare-enhancing rather than the case of laissez-faire. Second, if the environmental damage parameter is sufficiently small, then the equilibrium emission tax rate is invariably negative. It is therefore an emission subsidy. Moreover, total emissions under the emission subsidy become smaller than those under laissez-faire if the damage parameter is sufficiently small, and if the R&D cost is low. However, total emissions under the emission subsidy become greater than those under laissez-faire if the damage parameter is sufficiently small, and if the R&D cost is high.
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- Petrakis, Emmanuel & Xepapadeas, Anastasios, 2003. "Location decisions of a polluting firm and the time consistency of environmental policy," Resource and Energy Economics, Elsevier, vol. 25(2), pages 197-214, May.
- Yasunori Ouchida & Daisaku Goto, 2011.
"A note on environmental R&D under time-consistent emission tax,"
IDEC DP2 Series
1-6, Hiroshima University, Graduate School for International Development and Cooperation (IDEC).
- Yasunori Ouchida & Daisaku Goto, 2011. "A Note on Environmental R&D under Time-Consistent Emission Tax," International Journal of Business and Economics, College of Business and College of Finance, Feng Chia University, Taichung, Taiwan, vol. 10(3), pages 257-260, December.
- Poyago-Theotoky, J.A., 2007. "The organization of R&D and environmental policy," Journal of Economic Behavior & Organization, Elsevier, vol. 62(1), pages 63-75, January.
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