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Policy-Induced Technology Adoption: Evidence from the U.S. Lead Phasedown

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  • Kerr, Suzi
  • Newell, Richard

    (Resources for the Future)

Abstract

The theory of environmental regulation suggests that economic instruments, such as taxes and tradable permits, create more effective technology adoption incentives than conventional regulatory standards. We explore this issue for an important industry undergoing technological responses to a dramatic decrease in allowed pollution levels—the petroleum industry’s phasedown of lead in gasoline. Using a panel of refineries from 1971 to 1995, we provide some of the first direct evidence that alternative policies affect the pattern of adoption in expected ways. Importantly, we find that the tradable permit system used during the lead phasedown provided incentives for more efficient technology adoption decisions. Where environmentally appropriate, this suggests that flexible market-based regulation can achieve environmental goals while providing better incentives for technology diffusion.

Suggested Citation

  • Kerr, Suzi & Newell, Richard, 2001. "Policy-Induced Technology Adoption: Evidence from the U.S. Lead Phasedown," RFF Working Paper Series dp-01-14, Resources for the Future.
    • Handle: RePEc:rff:dpaper:dp-01-14
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    More about this item

    Keywords

    technology; adoption; diffusion; environment; regulation; lead; gasoline; tradable permit; incentive-based policy;
    All these keywords.

    JEL classification:

    • C41 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Duration Analysis; Optimal Timing Strategies
    • L71 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Mining, Extraction, and Refining: Hydrocarbon Fuels
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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