Emission taxation, green innovations and inverted-U aggregate R&D efforts in a linear state oligopoly game
Davide Dragone (),
Luca Lambertini () and
Working Papers from Dipartimento Scienze Economiche, Universita' di Bologna
We revisit the well known differential Cournot game with polluting emissions dating back to Benchekroun and Long (1998), proposing a version of the model in which environmental taxation is levied on emissions rather than the environmental damage. This allows to attain strong time consistency under open-loop information, and yields two main results which can be summarized as follows: (i) to attain a fully green technology in steady state, the regulator may equivalently adopt an appropriate tax rate (for any given number of firms) or regulate market access (for any given tax rate); (ii) if the environmental damage depends on emissions only (i.e., not on industry output) then the aggregate green R&D effort takes an inverted-U shape, in accordance with Aghion et al. (2005), and the industry structure maximising aggregate green innovation also minimises individual and aggregate emissions.
JEL-codes: C73 H23 L13 O31 Q52 (search for similar items in EconPapers)
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