Market Structure and Technology Diffusion Incentives under Emission Taxes and Emission Reduction Subsidies

Frans de Vries

Journal of Institutional and Theoretical Economics (JITE), 2007, vol. 163, issue 2, 256-268

Abstract: This paper compares emission taxes with emission reduction subsidies regarding the incentives they create to enhance technology diffusion under imperfect competition. Firms can adopt a "dirty" technology or a "clean" abatement technology. If the clean and dirty products are perfect substitutes, and clean firms face a net absolute advantage over dirty firms, taxes provide the strongest incentive. This ranking is reversed if there is a distortion on output. Subsidies can neutralize this distortion because output supply is stimulated, which would normally be lower than optimal under perfect competition.

JEL-codes: L13 O30 Q28 (search for similar items in EconPapers)
Date: 2007
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Citations: View citations in EconPapers (2)

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