IDEAS home Printed from https://ideas.repec.org/p/uea/aepppr/2010_5.html
   My bibliography  Save this paper

Technology Diffusion with Market Power in the Upstream Industry

Author

Listed:
  • Grischa Perino

    (School of Economics, University of East Anglia)

Abstract

This paper compares taxes and tradable permits when used to regulate a competitive and polluting downstream industry that can purchase an abatement technology from a monopolistic upstream industry. Second-best policies are derived for the full range of the abatement technology's emission intensities and marginal abatement costs. The second-best permit quantity can be both above or below the socially optimal emission level. Explicit consideration of the output market provides further insights on how market power distorts the allocation in the downstream industry. The ranking between permits and taxes is ambiguous in general, but taxes weakly dominate permits if full diffusion is socially optimal. In addition, it is analysed how a cap on the permit price affects the diffusion of an abatement technology.

Suggested Citation

  • Grischa Perino, 2010. "Technology Diffusion with Market Power in the Upstream Industry," University of East Anglia Applied and Financial Economics Working Paper Series 005, School of Economics, University of East Anglia, Norwich, UK..
  • Handle: RePEc:uea:aepppr:2010_5
    as

    Download full text from publisher

    File URL: https://archive.uea.ac.uk/menu/depts/eco/research/RePEc/uea/papers_pdf/UEA-AFE-005.pdf
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Montero, Juan-Pablo, 2002. "Permits, Standards, and Technology Innovation," Journal of Environmental Economics and Management, Elsevier, vol. 44(1), pages 23-44, July.
    2. Maia David & Bernard Sinclair-Desgagné, 2005. "Environmental Regulation and the Eco-Industry," Journal of Regulatory Economics, Springer, pages 141-155.
    3. Parry, Ian W. H., 1995. "Optimal pollution taxes and endogenous technological progress," Resource and Energy Economics, Elsevier, vol. 17(1), pages 69-85, May.
    4. Fischer, Carolyn & Parry, Ian W. H. & Pizer, William A., 2003. "Instrument choice for environmental protection when technological innovation is endogenous," Journal of Environmental Economics and Management, Elsevier, vol. 45(3), pages 523-545, May.
    5. Grischa Perino, 2008. "The merits of new pollutants and how to get them when patents are granted," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, pages 313-327.
    6. 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.
    7. Maia David & Bernard Sinclair-Desgagné, 2010. "Pollution Abatement Subsidies and the Eco-Industry," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, pages 271-282.
    8. Pizer, William A., 2002. "Combining price and quantity controls to mitigate global climate change," Journal of Public Economics, Elsevier, pages 409-434.
    9. Frans P. de Vries, 2007. "Market Structure and Technology Diffusion Incentives under Emission Taxes and Emission Reduction Subsidies," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 163(2), pages 256-268, June.
    10. Laffont, Jean-Jacques & Tirole, Jean, 1996. "Pollution permits and environmental innovation," Journal of Public Economics, Elsevier, pages 127-140.
    11. Greaker, Mads, 2006. "Spillovers in the development of new pollution abatement technology: A new look at the Porter-hypothesis," Journal of Environmental Economics and Management, Elsevier, vol. 52(1), pages 411-420, July.
    12. Parry, Ian W.H. & Timilsina, Govinda R., 2010. "How should passenger travel in Mexico City be priced?," Journal of Urban Economics, Elsevier, pages 167-182.
    13. Greaker, Mads & Rosendahl, Knut Einar, 2008. "Environmental policy with upstream pollution abatement technology firms," Journal of Environmental Economics and Management, Elsevier, vol. 56(3), pages 246-259, November.
    14. Joseph E. Aldy & William A. Pizer, 2009. "Issues in Designing U.S. Climate Change Policy," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 179-210.
    15. Requate, Till & Unold, Wolfram, 2003. "Environmental policy incentives to adopt advanced abatement technology:: Will the true ranking please stand up?," European Economic Review, Elsevier, vol. 47(1), pages 125-146, February.
    16. Roberts, Marc J. & Spence, Michael, 1976. "Effluent charges and licenses under uncertainty," Journal of Public Economics, Elsevier, pages 193-208.
    17. Grischa Perino, 2008. "The merits of new pollutants and how to get them when patents are granted," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, pages 313-327.
    18. Milliman, Scott R. & Prince, Raymond, 1989. "Firm incentives to promote technological change in pollution control," Journal of Environmental Economics and Management, Elsevier, vol. 17(3), pages 247-265, November.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Damien Sans & Sonia Schwartz & Hubert Stahn, 2015. "On Abatement Services: Market Power and Efficient Environmental Regulation," Working Papers halshs-01182200, HAL.
    2. Mahelet G. Fikru, 2013. "Environmental Policies, Mergers and Welfare," Economía Mexicana NUEVA ÉPOCA, , pages 449-461.
    3. Chiara Franco & Giovanni Marin, 2017. "The Effect of Within-Sector, Upstream and Downstream Environmental Taxes on Innovation and Productivity," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, pages 261-291.
    4. Natalia Zugravu-Soilita, 2017. "Trade in Environmental Goods: Empirical Exploration of Direct and Indirect Effects on Pollution by Country’s Trade Status," Working Papers 2017.56, Fondazione Eni Enrico Mattei.
    5. Idrissa Sibailly, 2013. "On the Pigouvian Tax Rule in an Open Economy: Opening the Gate to the Eco-industry," Working Papers hal-00911464, HAL.
    6. Gerlagh, Reyer & Kverndokk, Snorre & Rosendahl, Knut Einar, 2014. "The optimal time path of clean energy R&D policy when patents have finite lifetime," Journal of Environmental Economics and Management, Elsevier, vol. 67(1), pages 2-19.
    7. Alfred Endres & Tim Friehe, 2013. "The monopolistic polluter under environmental liability law: incentives for abatement and R&D," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 40(3), pages 753-770, March.
    8. Alfred Endres & Tim Friehe, 2012. "Market Power in the Eco-industry: Polluters’ Incentives under Environmental Liability Law," Land Economics, University of Wisconsin Press, pages 121-138.
    9. Perino, Grischa & Requate, Till, 2012. "Does more stringent environmental regulation induce or reduce technology adoption? When the rate of technology adoption is inverted U-shaped," Journal of Environmental Economics and Management, Elsevier, vol. 64(3), pages 456-467.
    10. Wenjun Sun & Naoto Jinji, 2014. "The Effects of Emission Taxes on Pollution through the Diffusion of Clean Technology:The Presence of Green Consumers," Discussion papers e-14-014, Graduate School of Economics Project Center, Kyoto University.
    11. Bouwe R. Dijkstra & Anuj J. Mathew, 2016. "Liberalizing trade in environmental goods and services," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 18(4), pages 499-526, October.
    12. Idrissa G.-O. Sibailly, 2015. "On the pigouvian tax rule in an open economy: the case of abatement technology trade," Economics Bulletin, AccessEcon, vol. 35(4), pages 2733-2741.
    13. repec:eee:ecmode:v:64:y:2017:i:c:p:601-609 is not listed on IDEAS
    14. Idrissa Sibailly, 2013. "On licensing and diffusion of clean technologies in oligopoly," Working Papers hal-00911453, HAL.
    15. Legree, Scott & Schirle, Tammy & Skuterud, Mikal, 2014. "The Effect of Labour Relations Laws on Union Density Rates: Evidence from Canadian Provinces," CLSSRN working papers clsrn_admin-2014-42, Vancouver School of Economics, revised 22 Sep 2014.
    16. Goeschl, Timo & Perino, Grischa, 2015. "The Climate Policy Hold-Up: Green Technologies,Intellectual Property Rights, and the Abatement Incentives of International Agreements," Working Papers 0591, University of Heidelberg, Department of Economics.
    17. Hattori, Keisuke, 2011. "Optimal Environmental Policy under Monopolistic Provision of Clean Technologies," MPRA Paper 28837, University Library of Munich, Germany.

    More about this item

    Keywords

    diffusion; market power; price bounds; taxes; tradable permits;

    JEL classification:

    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:uea:aepppr:2010_5. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Theodore Turocy). General contact details of provider: http://edirc.repec.org/data/esueauk.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.