Hold-up Problems with Respect to R&D Investment and Licensing in Environmental Regulation

Jörg Breitscheidel

No 05-86, ZEW Discussion Papers from ZEW - Leibniz Centre for European Economic Research

Abstract: We explore the design of self-financing tax-subsidy schemes to solve hold-up problems in environmental regulation. The announcement of the tax rate seems to be preferable to solve hold-up problems with respect to the investment in environmental R&D. In contrast, only the announcement of the subsidy rate is adequate to solve hold-up problems with respect to the licensing of environmentally friendly technologies. Altogether, the announcement of the subsidy rate yields higher expected social welfare than the announcement of the tax rate or the standard emission taxation if the marginal damage of emissions exceeds a certain level.

Keywords: Hold-up problems; Environmental regulation; Taxes and subsidies; Selffinancing mechanisms; Emission control (search for similar items in EconPapers)
JEL-codes: D43 D62 L50 Q28 (search for similar items in EconPapers)
Date: 2005
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:zewdip:4569

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