Investment and emission control under technology and pollution externalities

Geoffrey Heal and Nori Tarui

Resource and Energy Economics, 2010, vol. 32, issue 1, 1-14

Abstract: This paper studies incentives to develop advanced pollution abatement technology when technology may spillover across agents and pollution abatement is a public good. We are motivated by a variety of pollution control issues where solutions require the development and implementation of new pollution abatement technologies. We show that at the Nash equilibrium of a simultaneous-move game with R&D investment and emission abatement, whether the free rider effect prevails and under-investment and excess emissions occur depends on the degree of technology spillovers and the effect of R&D on the marginal abatement costs. There are cases in which, contrary to conventional wisdom, Nash equilibrium investments in emissions reductions exceed the first-best case.

Keywords: International; environmental; agreement; Pollution; abatement; costs; Endogenous; technological; change (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (14)

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