Discussion Papers 606 - Statistics Norway, January 2010

---

Halvor Briseid Storrøsten

Incentives to invest in abatement technology. A tax versus emissions trading under imperfect competition

Abstract:
In the longer run, effects on R&D and the implementation of advanced abatement technology may be at least as important as short-run cost effectiveness when we evaluate public environmental policy. In this paper, we show that the number of firms that adopt advanced abatement technology could be higher with emissions trading than with a tax if there is imperfect competition in the permits market. Under perfect competition, the number would always be higher with a tax, given that the regulator is myopic. If we allow for environmental policy response, the ranking is still ambiguous under imperfect competition, while the regimes become equal with perfect competition.

Keywords: Auctioned permits, Emissions taxes, technology adoption, Cournot competition

JEL classification: H23, Q55, Q58

Acknowledgement: I am grateful to Cathrine Hagem, Michael Hoel and Knut Einar Rosendahl for valuable comments. Financial support from the Renergi program of the Norwegian Research Council and from the NEECI program of the Nordic Energy Research is acknowledged.

Address:
Halvor Briseid Storrøsten, Statistics Norway, Research Department. E-mail: halvor.storrosten@ssb.no

Download publication in fulltext:

• dp606.pdf Publication in Adobe Acrobat format

---

Home || Search || Comments? || Order || Library || E-mail