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Market Structure and Technology Diffusion Incentives under Emission Taxes and Emission Reduction Subsidies

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  • Frans P. de Vries

Abstract

This paper compares emission taxes with emission reduction subsidies regarding the incentives they create to enhance technology diffusion under imperfect competition. Firms can adopt a "dirty" technology or a "clean" abatement technology. If the clean and dirty products are perfect substitutes, and clean firms face a net absolute advantage over dirty firms, taxes provide the strongest incentive. This ranking is reversed if there is a distortion on output. Subsidies can neutralize this distortion because output supply is stimulated, which would normally be lower than optimal under perfect competition.

Suggested Citation

  • Frans P. de Vries, 2007. "Market Structure and Technology Diffusion Incentives under Emission Taxes and Emission Reduction Subsidies," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 163(2), pages 256-268, June.
    • Handle: RePEc:mhr:jinste:urn:sici:0932-4569(200706)163:2_256:msatdi_2.0.tx_2-7
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    References listed on IDEAS

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    Cited by:

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    2. Grischa Perino, 2010. "Technology Diffusion with Market Power in the Upstream Industry," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 46(4), pages 403-428, August.

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    More about this item

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General

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