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Emission taxation, green innovations and inverted-U aggregate R&D efforts in a linear state oligopoly game

Davide Dragone (), Luca Lambertini () and A. Palestini

Working Papers from Dipartimento Scienze Economiche, Universita' di Bologna

Abstract: 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)
New Economics Papers: this item is included in nep-com, nep-ene, nep-env, nep-ind and nep-knm
Date: 2017-04
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