Market Structure and Technology Diffusion Incentives Under Alternative Environmental Policy Schemes

CentER Discussion Paper No. 2004-95

34 Pages Posted: 12 Nov 2004

Date Written: August 2004

Abstract

The paper compares emission taxes, subsidies, permits and credits with respect to the incentives they create to enhance technology diffusion under imperfect competition. Forms can adopt a dirty technology or a clean abatement technology. When the clean and dirty products are perfect substitutes, and clean firms face a net absolute advantage over dirty firms, permits and taxes provide the strongest incentive, followed by credits and subsidies respectively. This ranking order is reversed if there is a distortion on output. Subsidies can neutralize this distortion; subsidies stimulate output supply, which would normally be lower than optimal under perfect competition.

Keywords: Market structure, diffusion, incentives, environmental policy, product differentiation

JEL Classification: L13, Q28, O30

Suggested Citation

de Vries, Frans P., Market Structure and Technology Diffusion Incentives Under Alternative Environmental Policy Schemes (August 2004). CentER Discussion Paper No. 2004-95, Available at SSRN: https://ssrn.com/abstract=617201 or http://dx.doi.org/10.2139/ssrn.617201

Frans P. De Vries (Contact Author)

affiliation not provided to SSRN ( email )

No Address Available

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