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Abatement Technology Search

Author

Listed:
  • Alain-Désiré Nimubona

    (Department of Economics, University of Waterloo)

  • Andrew Leach

    (Alberta School of Business, University of Alberta)

Abstract

We develop a three-stage model of abatement technology search, adoption, and deployment. Using this model, which draws on search theory tools more frequently used in labour and monetary economics, we compare market-based and command-and-control pollution control instruments with respect to the incentives each provides for abatement technology search and adoption, expected emissions reductions, and expected compliance costs. We show that the polluting firm always has more incentives to search for and adopt a more ecient abatement technology under either an emissions tax or a tradeable permit system than under an equivalently stringent emissions standard. We also show that while expected incentives for innovation are comparable under emissions taxes and tradeable permit regimes, the likelihood for total future compliance costs to be reduced after an increase in the stringency of environmental policy - the so-called Porter hypothesis - is higher with a tradeable permit regime.

Suggested Citation

  • Alain-Désiré Nimubona & Andrew Leach, 2014. "Abatement Technology Search," Working Papers 1407, University of Waterloo, Department of Economics, revised Aug 2014.
  • Handle: RePEc:wat:wpaper:1407
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    References listed on IDEAS

    as
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    More about this item

    JEL classification:

    • 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
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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