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The organization of R&D and environmental policy: So does emission subsidy reduce emissions?

Author

Listed:
  • Yasunori Ouchida

    (Department of Economics, Hiroshima University)

  • Daisaku Goto

    (Graduate School for International Development and Cooperation, Hiroshima University)

Abstract

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.

Suggested Citation

  • Yasunori Ouchida & Daisaku Goto, 2012. "The organization of R&D and environmental policy: So does emission subsidy reduce emissions?," IDEC DP2 Series 2-13, Hiroshima University, Graduate School for International Development and Cooperation (IDEC).
  • Handle: RePEc:hir:idecdp:2-13
    as

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    File URL: http://ir.lib.hiroshima-u.ac.jp/files/public/33354/20141016193320788309/IDEC-DP2_02-13.pdf
    File Function: First version, 2012
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    References listed on IDEAS

    as
    1. 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.
    2. 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.
    3. 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.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Emission subsidy; Emission tax; Emission reduction; Environmental R&D; Cournot duopoly;

    JEL classification:

    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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