Incentives for Green R&D in a Dirty Industry under Price Competition

Indrani Roy Chowdhury

Economics Bulletin, 2009, vol. 29, issue 3, 2265-2274

Abstract: In an oligopolistic framework with price competition, we examine the effect of abatement taxes, as well as emission caps on the incentives for adopting a green technology. We identify two new strategic effects, namely the relative efficiency effect, and the competition softening effect, that affect the incentive for green R&D. Under an abatement tax, R&D incentives increase whenever the new technology is non-drastic, and the demand function is either approximately linear, or not too elastic. Another sufficient condition is that the market size be sufficiently large. With emission caps, the result depends on how green the new technology is.

Keywords: Abatement tax; emission caps; environmental policy; green R&D; price competition. (search for similar items in EconPapers)
JEL-codes: H2 L1 (search for similar items in EconPapers)
Date: 2009-09-11
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Citations: View citations in EconPapers (4)

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