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Abatement Technology Search

Alain-Désiré Nimubona () and Andrew Leach ()

No 1407, Working Papers from University of Waterloo, Department of Economics

Abstract: We develop a three-stage model of abatement technology search, adoption, and deployment. Using this model, which draws on search theory tools more frequently used in labour and monetary economics, we compare market-based and command-and-control pollution control instruments with respect to the incentives each provides for abatement technology search and adoption, expected emissions reductions, and expected compliance costs. We show that the polluting firm always has more incentives to search for and adopt a more ecient abatement technology under either an emissions tax or a tradeable permit system than under an equivalently stringent emissions standard. We also show that while expected incentives for innovation are comparable under emissions taxes and tradeable permit regimes, the likelihood for total future compliance costs to be reduced after an increase in the stringency of environmental policy - the so-called Porter hypothesis - is higher with a tradeable permit regime.

JEL-codes: Q55 Q58 H23 D83 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2014-08, Revised 2014-08
New Economics Papers: this item is included in nep-ene, nep-env, nep-ino, nep-reg and nep-res
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Persistent link: https://EconPapers.repec.org/RePEc:wat:wpaper:1407

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