Green Technology and Optimal Emissions Taxation

Abstract

We examine the impact of an optimal emissions tax on research and development of emission reducing green technology (E-R&D) in the presence of R&D spillovers. We show that the size and effectiveness of the optimal emissions tax depends on the type of the R&D spillover: input or output spillover. In the case of R&D input spillovers (where only knowledge spillovers are accounted for), the optimal emissions tax required to stimulate R&D is always higher than when there is an R&D output spillover (where abatement and knowledge spillovers exist si- * The authors gratefully acknowledge Alfred Endres and Emmanuel Petrakis for discussions and suggestions as well as participants at EAERE 2012, PET 2012 and JEI 2012 for their comments. The usual disclaimer applies.† McDonald acknowledges funding from a Global Change Institute Small Grant and UQ Early Career Researcher Grant.‡ Corresponding Author. School of Economics, La Trobe University, Melbourne, VIC 3086, Australia. Tel: +61 (0)3 9479 1409, Fax: +61 (0) 9479 5971 1 multaneously). We also find that optimal emissions taxation and cooperative R&D complement each other when R&D spillovers are small, leading to lower emissions.

Taxation, redistribution, and observability in social dilemmas

“…We show that both monetary mechanisms improve cooperation by reducing the level of extraction, increasing efficiency, and reducing payoff inequality. Their impact on cooperation, that is driven by the cost of overextraction and possibly also by tax aversion, is in line with the consensus in the literature about the efficiency generated from pricing and taxation instruments (see McDonald & Poyago‐Theotoky, , for a recent example). We show that this type of mechanism is efficiency‐enhancing even when populations are heterogeneous in their extraction capacities.…”

Strategic non‐use of the government's precommitment ability for emissions taxation: Environmental R&D formation in a Cournot duopoly

“…8 8 We focus on end‐of‐pipe technology. For a discussion of cleaner production technology, see Chiou and Hu (2001), McDonald and Poyago‐Theotoky (2017), Puller (2006), and others. Furthermore, for the environmental R&D model in a vertical relationship between a polluting industry and an eco‐industry, see Nimubona and Benchekroun (2015).…”

Emission Taxes, Clean Technology Cooperation, and Product Market Collusion: Experimental Evidence

“…The damage parameter is a scaling factor in the quadratic damage function and changing its value does not alter its expected effect on other variables. It is also common in the literature that analyze environmental damage arising from firms' pollution emissions (such as Camacho‐Cuena, Requate, and Waichman ; McDonald and Poyago‐Theotoky ) to assume a unit value for the damage parameter. Moreover, theoretical results from Poyago‐Theotoky () show that forming an ERC for research cooperation leads to greater R&D investment than noncooperative research arrangements when the environmental damage parameter is small ( d < 3/2), and this is robust to the size of the spillover ( β ) and R&D efficiency parameter ( γ ).…”