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End of the line: A Note on Environmental Policy and Innovation when Governments cannot Commit

Author

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  • Juan-Pablo Montero

    (Instituto de Economía. Pontificia Universidad Católica de Chile.)

Abstract

It is widely accepted that one of the most important characteristics of an effective climate policy is to provide firms with credible incentives to make long-run investments in R&D that can drastically reduce emissions. Recognizing that a government may be tempted to revise its policy design after innovations become available, this note shows how the performance of two policy instruments –prices (uniform taxes) and quantities (tradeable pollution permits)– differ in such a setting.I also discuss the gains from combining either instrument with subsidies to adopting firms.

Suggested Citation

  • Juan-Pablo Montero, 2011. "End of the line: A Note on Environmental Policy and Innovation when Governments cannot Commit," Documentos de Trabajo 394, Instituto de Economia. Pontificia Universidad Católica de Chile..
    • Handle: RePEc:ioe:doctra:394
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    File URL: https://www.economia.uc.cl/docs/doctra/dt-394.pdf
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    References listed on IDEAS

    as
    1. Carrión-Flores, Carmen E. & Innes, Robert, 2010. "Environmental innovation and environmental performance," Journal of Environmental Economics and Management, Elsevier, vol. 59(1), pages 27-42, January.
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    More about this item

    Keywords

    Pollution control; innovation; commitment;
    All these keywords.

    JEL classification:

    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • 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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