Cooperation in green R &D and environmental policies: tax or standard

Marie-Laure Cabon-Dhersin () and Natacha Raffin
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Marie-Laure Cabon-Dhersin: Univ Rouen Normandie, Normandie Univ, LERN UR 4702

Journal of Regulatory Economics, 2024, vol. 66, issue 2, No 5, 205-237

Abstract: Abstract In this article, we compare a tax and a standard as environmental tools depending on firms’ R &D strategy and the government’s ability to credibly commit to its policy. We consider a duopoly model where production is polluting and in an effort to mitigate emissions, firms invest in green R &D (in the presence of technological spillovers) either cooperatively or non-cooperatively. We explore two policy games in which the regulator establishes an emission tax or an emission standard either before or after firms engage in R &D. We endogenize both the firms’ R &D strategy and the regulator’s choice of policy instrument. We find that an emission standard is adopted only when firms choose not to cooperate. Conversely, a tax is desirable when firms collaborate in green R &D. Moreover, we expand our framework by offering the opportunity for the regulator to authorize or ban cooperation in green R &D before the firms make their strategic decisions.

Keywords: R& D cooperation; Spillovers; Taxes; Standards; Cournot competition; Policy games; Competition policy (search for similar items in EconPapers)
JEL-codes: L13 P48 Q55 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s11149-024-09475-4

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