Emissions Pricing, Spillovers, and Public Investment in Environmentally Friendly Technologies

Carolyn Fischer

Discussion Papers from Resources For the Future

Abstract: In a second-best world of below-optimal pollution pricing, the public return to R&D may be greater than under Pigouvian pricing, due to excess benefits of increasing abatement, or it may be lower, since private actors lack the incentives to take full advantage of the new, cleaner technologies. This paper uses a simple model to demonstrate the interaction between environmental policies, R&D externalities, and the social return to innovation. The results indicate that strong public support for innovation is only justified if at least a moderate emissions policy is in place and spillover effects are significant. Furthermore, in most cases, policy constraints that limit regulatory burdens tend to further limit the scope for public support, even when cost reductions allow for more stringent abatement targets. An exception is when knowledge of the policy adjustment process further reduces private innovation incentives.

Keywords: emissions price; technological innovation; spillovers; R&D policy (search for similar items in EconPapers)
JEL-codes: Q28 O38 H23 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ene, nep-env, nep-ino and nep-pbe
Date: 2004-02-11
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Journal Article: Emissions pricing, spillovers, and public investment in environmentally friendly technologies (2008)
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Persistent link: http://EconPapers.repec.org/RePEc:rff:dpaper:dp-04-02

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