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

Juan-Pablo Montero

No 394, Documentos de Trabajo from Instituto de Economia. 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.

Keywords: Pollution control; innovation; commitment (search for similar items in EconPapers)
JEL-codes: D42 Q55 Q58 (search for similar items in EconPapers)
Date: 2011
New Economics Papers: this item is included in nep-ene, nep-env and nep-ino
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (28)

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Persistent link: https://EconPapers.repec.org/RePEc:ioe:doctra:394

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