R&D and abatement under environmental liability law: Comparing incentives under strict liability and negligence if compensation differs from harm

Alfred Endres and Tim Friehe

Energy Economics, 2011, vol. 33, issue 3, 419-425

Abstract: This paper analyzes equilibrium R&D in pollution control and equilibrium pollution abatement by polluters who are subject to environmental liability law when the level of compensation differs from the level of environmental harm. We contrast the performance of strict liability with that of the negligence rule. Privately optimal levels necessarily deviate from socially optimal ones under strict liability, whereas private decisions are first-best under negligence unless compensation is much smaller than harm. It is established that the way in which privately optimal R&D deviates from the first-best level depends on the kind of technical change in pollution abatement. Counterintuitively polluters might overinvest into R&D in pollution control if compensation falls short of harm, and may underinvest if compensation exceeds harm.

Keywords: Emission; abatement; technology; Induced; technical; change; Environmental; liability; law (search for similar items in EconPapers)
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0140-9883(10)00188-X
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:33:y:2011:i:3:p:419-425

Access Statistics for this article

Energy Economics is currently edited by R. S. J. Tol, Beng Ang, Lance Bachmeier, Perry Sadorsky, Ugur Soytas and J. P. Weyant

More articles in Energy Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().