EconPapers    
Economics at your fingertips  
 

Incentives for innovation and adoption of new technology under emissions trading

Svante Mandell

No 2009:10, Working Papers from Swedish National Road & Transport Research Institute (VTI)

Abstract: A common claim in both the public and academic debate is that a tradable emission permits scheme does not provide sufficient incentives for R&D investments. The present paper addresses R&D investments and penetration rates of new technology focusing on the specific characteristics of a tradable permits market. It is showed that a complex dependency between the emissions cap, the market price for emission permits, the price for technology once it is developed and the R&D investment decision add an additional layer to the ‘traditional’ market failures associated with R&D. Even though the cap and how it is calibrated in response to the introduction of new technology is shown to be of importance both for the level of R&D investment and the technology’s penetration rate, we argue that the policy maker’s ability to use the cap to counter market failures in the R&D stage is limited. This is due to a dynamic inconsistency problem where the policy maker is unable to credibly commit to a future policy that is more stringent than motivated by efficiency concerns given the then existing technology. Such a policy may not be stringent enough to cover the necessary R&D investments.

Keywords: Tradable permits; Innovation; R&D; Policy; Dynamic inconsistency (search for similar items in EconPapers)
JEL-codes: L51 O31 Q55 Q58 (search for similar items in EconPapers)
Pages: 21 pages
Date: 2009-10-09
New Economics Papers: this item is included in nep-env, nep-ino, nep-ipr, nep-pr~ and nep-mic
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.transportportal.se/SWoPEc/Innovation_incentives_under_CnT_WP.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hhs:vtiwps:2009_010

Access Statistics for this paper

More papers in Working Papers from Swedish National Road & Transport Research Institute (VTI) VTI, Transport Economics, P.O. Box 6056, SE-171 06 Solna, Sweden. Contact information at EDIRC.
Bibliographic data for series maintained by Biblioteket vid VTI () and Emil Svensson () and Claes Eriksson () and Tova Äng ().

 
Page updated 2024-05-17
Handle: RePEc:hhs:vtiwps:2009_010