Taxes, Permits, and the Diffusions of a New Technology

Jessica Coria

RFF Working Paper Series from Resources for the Future

Abstract: This study looks at the effects of the choice between taxes and permits on the pattern of adoption of a new (pollution) emissions abatement technology. It uses a dynamic setting, where the regulator observes the arrival and initial use of the technology and determines the optimal ex-post amount of emissions before firms start to adopt the technology. In the model here, the adoption benefits and costs depend on the number of firms that are already using the technology. Thus, each firm decides the optimal date to adopt the technology, considering its benefits and costs, as well as the advantage they will gain over their rivals, producing a sequence of adoption that is “diffused†into the industry over time. With this framework, the study shows that when the output demand is elastic, auctioned permits induce an earlier diffusion than taxes and thus provide the largest benefit to social welfare.

Keywords: Environmental policy; technological adoption; tradable permits; taxes (search for similar items in EconPapers)
JEL-codes: L13 O33 Q53 Q55 Q58 (search for similar items in EconPapers)
Date: 2008-10-15
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Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Taxes, permits, and the diffusion of a new technology (2009)
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