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Timing and Commitment of Environmental Policy, Adoption of New Technology, and Repercussions on R&D

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  • Till Requate

Abstract

We investigate the interplay between environmental policy, incentives to adoptnew technology, and repercussions on R&D. We study a model where a monopolistic upstream firm engages in R&D and sells advanced abatement technology to polluting downstream firms. We consider four different timing and commitment regimes of environmental tax and permit policies: ex post taxation (or issuing permits), interim commitment to a tax rate (a quota of permits) after observing R&D success but before adoption, and finally two types of ex antecommitment before R&D activity, one with a unique tax rate (quota of permits), the other one with a menu of tax rates (permit quotas). We study the second best tax and permit policies and rank these with respect to welfare. In particular, we find that commitment to a menu of tax rate dominates all other policy regimes. Copyright Springer 2005

Suggested Citation

  • Till Requate, 2005. "Timing and Commitment of Environmental Policy, Adoption of New Technology, and Repercussions on R&D," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 31(2), pages 175-199, June.
    • Handle: RePEc:kap:enreec:v:31:y:2005:i:2:p:175-199
    DOI: 10.1007/s10640-005-1770-x
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    References listed on IDEAS

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    1. Stavins, Robert & Jaffe, Adam & Newell, Richard, 2000. "Technological Change and the Environment," Working Paper Series rwp00-002, Harvard University, John F. Kennedy School of Government.
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    More about this item

    Keywords

    commitment; emission taxes; environmental policy; R&D; technology adoption; time consistency; tradeable permits; L5; Q2; Q28;
    All these keywords.

    JEL classification:

    • L5 - Industrial Organization - - Regulation and Industrial Policy
    • Q2 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy

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