How Large Are the Welfare Gains from Technological Innovation Induced by Environmental Policies?

Ian Parry (), William A. Pizer and Carolyn Fischer

Discussion Papers from Resources For the Future

Abstract: This paper examines whether the welfare gains from technological innovation that reduces future abatement costs are larger or smaller than the “Pigouvian” welfare gains from optimal pollution control. The relative welfare gains from innovation depend on three key factors - the initially optimal level of abatement, the speed at which innovation reduces future abatement costs, and the discount rate. We calculate the welfare gains from innovation under a variety of different scenarios. Mostly they are less than the Pigouvian welfare gains. To be greater, innovation must reduce abatement costs substantially and quickly and the initially optimal abatement level must be fairly modest.

Keywords: innovation; welfare; regulation; endogenous; technological; change; R&D (search for similar items in EconPapers)
JEL-codes: Q16 Q28 O32 O33 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-env and nep-ino
Date: 2002-10-01
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Related works:
Working Paper: How Large Are the Welfare Gains from Technological Innovation Induced by Environmental Policies? (2002)
Journal Article: How Large Are the Welfare Gains from Technological Innovation Induced by Environmental Policies? (2003)
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Persistent link: http://EconPapers.repec.org/RePEc:rff:dpaper:dp-02-57

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