Environmental Policy, the Porter Hypothesis and the Composition of Capital: Effects of Learning and Techonological Progress

CentER Discussion Paper No. 2003-61

29 Pages Posted: 23 Jun 2004

See all articles by Gustav Feichtinger

Gustav Feichtinger

Vienna University of Technology - Institute for Econometrics, Operations Research and Systems Theory

R. F. Hartl

University of Vienna

Peter M. Kort

Tilburg University - Department of Econometrics & Operations Research; Tilburg University - Center for Economic Research (CentER)

V. M. Veliov

Vienna University of Technology - Institute for Econometrics, Operations Research and Systems Theory

Date Written: 2003

Abstract

In this paper, the effect of environmental policy on the composition of capital is investigated. By allowing for non-linearities, it generalizes Xepapadeas and De Zeeuw (Journal of Environmental Economics and Management, 1999) and determines scenarios in which their results do not carry over. In particular, we show that the way acquisition cost of investment decreases with the age of the capital stock is of crucial importance. Also, it is obtained that environmental policy has opposite effects on the average age of the capital stock in the case of either deterioration or depreciation. We also focus more explicitly on learning and technological progress. Among others, we obtain that in the presence of learning, implementing a stricter environmental policy with the aim to reach a certain target of emissions reduction has a stronger negative effect on industry profits, which implies quite the opposite as to what is described by the Porter hypothesis.

Keywords: Environmental policy, capital, learning, technological change

JEL Classification: C61, O33, Q28

Suggested Citation

Feichtinger, Gustav and Hartl, R. F. and Kort, Peter and Veliov, V. M., Environmental Policy, the Porter Hypothesis and the Composition of Capital: Effects of Learning and Techonological Progress (2003). CentER Discussion Paper No. 2003-61, Available at SSRN: https://ssrn.com/abstract=556089 or http://dx.doi.org/10.2139/ssrn.556089

Gustav Feichtinger (Contact Author)

Vienna University of Technology - Institute for Econometrics, Operations Research and Systems Theory ( email )

Argentinierstrasse 8
A-1040 Vienna
Austria
+43-1-58801 ext. 11927 (Phone)
+43-1-5054524 (Fax)

R. F. Hartl

University of Vienna ( email )

Bruenner Strasse 72
Vienna 1210, Vienna
Austria
+43-1-4277-38091 (Phone)
+43-1-4277-38094 (Fax)

Peter Kort

Tilburg University - Department of Econometrics & Operations Research ( email )

Tilburg, 5000 LE
Netherlands
+31 13 466 2062 (Phone)
+31 13 466 3072 (Fax)

HOME PAGE: http://center.uvt.nl/staff/kort/

Tilburg University - Center for Economic Research (CentER) ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands
+31 13 466 2062 (Phone)
+31 13 466 3072 (Fax)

V. M. Veliov

Vienna University of Technology - Institute for Econometrics, Operations Research and Systems Theory

Argentinierstrasse 8
A-1040 Vienna
Austria

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