Do emission subsidies reduce emission? In the context of environmental R&D organization

Yasunori Ouchida () and Daisaku Goto

Economic Modelling, 2014, vol. 36, issue C, 511-516

Abstract: This paper, which reexamines the Poyago-Theotoky model, provides additional investigation that was conducted under a corrected environmental damage parameter. As new findings, we obtain the following. First, social welfare under a time-consistent emission tax (emission subsidy) policy is always welfare-enhancing rather than the case of laissez-faire. Second, if the environmental damage parameter is sufficiently small, then the equilibrium emission tax rate is invariably negative. It is therefore an emission subsidy. Moreover, total emissions under the emission subsidy scenario become less than those under laissez-faire if the damage parameter is sufficiently small, and if the R&D cost is low. However, total emissions under the emission subsidy become greater than those under laissez-faire if the damage parameter is sufficiently small, and if the R&D cost is high.

Keywords: Emission subsidy; Emission tax; Emission reduction; Environmental R&D; Cournot duopoly (search for similar items in EconPapers)
JEL-codes: L13 O32 Q55 Q58 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (33)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:36:y:2014:i:c:p:511-516

DOI: 10.1016/j.econmod.2013.10.009

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