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Incentives for Technological Development: BAT Is BAD

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  • Sangeeta Bansal
  • Shubhashis Gangopadhyay

Abstract

This paper examines the effect of environmental regulation on a firm’s incentives to invest in developing cheaper (clean-up) technologies in a model where consumers are willing to pay for environmentally clean technologies. It focuses on two types of policies: a BAT based policy and a commitment policy. In the former policy, the standard is based on the best available technology (BAT) where the regulator re-optimizes environmental regulation in response to new technologies. However, under a commitment policy, the regulator announces a regulation and sticks to it irrespective of the firm’s adopted technology. The paper finds that cleaner technologies are not adopted if the regulator announces a BAT based policy. A commitment policy not only leads to positive investment in research and development but is also welfare improving. Copyright Springer 2005

Suggested Citation

  • Sangeeta Bansal & Shubhashis Gangopadhyay, 2005. "Incentives for Technological Development: BAT Is BAD," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 30(3), pages 345-367, March.
    • Handle: RePEc:kap:enreec:v:30:y:2005:i:3:p:345-367
    DOI: 10.1007/s10640-004-4223-z
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    2. Basak Bayramoglu, 2010. "How does the design of international environmental agreements affect investment in environmentally-friendly technology?," Post-Print hal-01172961, HAL.
    3. Barbieri, Nicolò, 2015. "Investigating the impacts of technological position and European environmental regulation on green automotive patent activity," Ecological Economics, Elsevier, vol. 117(C), pages 140-152.

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