Environmental regulations in private and mixed duopolies: Taxes on emissions versus green R&D subsidies

Sang-Ho Lee () and Chul-Hi Park ()

Economic Systems, 2021, vol. 45, issue 1

Abstract: In this article, we compare two kinds of environmental regulations—emissions taxes and green R&D subsidies—in private and mixed-duopoly markets in the presence of R&D spillovers. We show that a green R&D subsidy is better (worse) than an emissions tax when the green R&D is efficient (inefficient), irrespective of R&D spillovers, whereas the existence of a publicly owned firm encourages the government to adopt a subsidy policy. We also show that the optimal policy choice depends on R&D efficiency and spillovers. In particular, when green R&D is inefficient and the spillover rate is low (high), the government should choose an emissions tax and (not) privatize the state-owned firm. When green R&D is efficient, however, an R&D subsidy is better, but a privatization policy is not desirable for society, irrespective of spillovers.

Keywords: Emissions tax; Green R&D subsidy; Privatization policy; R&D spillovers (search for similar items in EconPapers)
JEL-codes: L13 L21 M14 (search for similar items in EconPapers)
Date: 2021
References: Add references at CitEc
Citations: View citations in EconPapers (22)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecosys:v:45:y:2021:i:1:s0939362520301709

DOI: 10.1016/j.ecosys.2020.100852

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