Timing of adoption of clean technologies, transboundary pollution and international trade

Mehdi Ben Jebli () and Slim Ben Youssef

MPRA Paper from University Library of Munich, Germany

Abstract: We consider a symmetric model composed of two countries and a firm in each country. Firms produce the same good by means of a polluting technology that uses fossil energy. However, these firms can adopt a clean technology that uses a renewable energy and that has a lower unit cost. Surprisingly, opening markets to international competition increases the per-unit emission-tax and decreases the per-unit production subsidy. Interestingly, the socially-optimal adoption date under a common market better internalizes transboundary pollution than that under autarky, and than the optimal adoption date of regulated firms. However, the optimal adoption date of non-regulated firms completely don't internalize transboundary pollution. In autarky (resp. a common market), regulated firms adopt earlier (resp. later) than what is socially-optimal, whereas non-regulated firms adopt later than the socially-optimal adoption date and than the optimal adoption date of regulated firms. Therefore, in autarky (resp. a common market) regulators can induce firms to adopt at the socially-optimal adoption date by giving them postpone ( resp. speed up) adoption subsidies. Opening markets to international trade, speeds up the socially-optimal adoption date and delays optimal adoption dates of regulated and non-regulated firms.

Keywords: Regulation; Adoption date; Renewable energy; Transboundary pollution; Common market (search for similar items in EconPapers)
JEL-codes: C72 D62 F18 H23 L51 O13 O32 O38 Q27 Q55 (search for similar items in EconPapers)
Date: 2012-11
New Economics Papers: this item is included in nep-ene, nep-env and nep-reg
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