The organization of R&D and environmental policy: So does emission subsidy reduce emissions?

Yasunori Ouchida () and Daisaku Goto

No 2-13, IDEC DP2 Series from Hiroshima University, Graduate School for International Development and Cooperation (IDEC)

Abstract: This paper reexamines the Poyago-Theotoky model and provides additional investigation that was conducted under a corrected environmental damage parameter. As new findings, we obtain the following. First, social welfare under a time-consistent emission tax (emission subsidy) policy is always welfare-enhancing rather than the case of laissez-faire. Second, if the environmental damage parameter is sufficiently small, then the equilibrium emission tax rate is invariably negative. It is therefore an emission subsidy. Moreover, total emissions under the emission subsidy become smaller than those under laissez-faire if the damage parameter is sufficiently small, and if the R&D cost is low. However, total emissions under the emission subsidy become greater than those under laissez-faire if the damage parameter is sufficiently small, and if the R&D cost is high.

Keywords: Emission subsidy; Emission tax; Emission reduction; Environmental R&D; Cournot duopoly (search for similar items in EconPapers)
JEL-codes: L13 O32 Q55 Q58 (search for similar items in EconPapers)
Pages: 12 pages
Date: 2012-09
New Economics Papers: this item is included in nep-ene, nep-env, nep-ino and nep-res
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