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Should environmental R&D be prioritized?

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  • Golombek, Rolf
  • Greaker, Mads
  • Hoel, Michael

Abstract

An innovator may not be able to capture the full social benefit of her innovation and, therefore, governments support private R&D through various measures. We compare a market good innovation—to develop a more efficient technology to produce a standard market good—with an environmental innovation—to develop a more efficient abatement technology—that has the same potential to increase the social surplus. In the first-best outcome, which can be achieved by offering an R&D subsidy and a diffusion subsidy, the R&D subsidy should be greatest for an environmental innovation, whereas the diffusion subsidy should be greatest for a market good innovation. The ranking of the two types of subsidies reflects that the appropriability problem is greater for an environmental innovation than for a market good innovation.

Suggested Citation

  • Golombek, Rolf & Greaker, Mads & Hoel, Michael, 2020. "Should environmental R&D be prioritized?," Resource and Energy Economics, Elsevier, vol. 60(C).
    • Handle: RePEc:eee:resene:v:60:y:2020:i:c:s0928765519301861
    DOI: 10.1016/j.reseneeco.2019.101132
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    References listed on IDEAS

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    More about this item

    Keywords

    R&D; Environmental R&D; Innovations; Endogenous technological change; Innovation prize; Diffusion subsidy;
    All these keywords.

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • 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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