Is emission intensity or output U‐shaped in the strictness of environmental policy?

Abstract

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Diffusion and adoption of advanced emission abatement technology induced by permit trading

“…InDijkstra and Gil-Moltó (2018), an increase of the emission-to-output ratio ε corresponds to an increase of the technology level T in our model. 11 This residual industry is necessary to formalize a plausible benchmarking regime.…”

“…These curves differ in their shade of grey: the darker the curve, the higher is the technology level. As in Dijkstra and Gil-Moltó (2018) . The equilibrium permit price equals p 1 1 .…”

“…With respect to marginal effects, we follow Dijkstra and Gil-Moltó (2018) and assume that a marginal technology improvement implies lower (higher) MACs MAC e T C e T e ( , ) = −…”

“…Dijkstra and Gil-Moltó (2018) consider MAC functions of type MAC e ε ( L may diffuse the advanced technology to m other firms with abatement costs C…”

Emissions Markets with Price Stabilizing Mechanisms: Possible Unpleasant Outcomes

“…The intersection of the MEB curves has interesting implications in terms of environmental regulation, as it implies that pushing the emissions price above a certain critical level can bring about higher emissions when firms innovate as compared to when they do not (see for instance Perino and Requate, 2012;Brechet andMeunier, 2014 andDijkstra andGil-Molto, 2018). In Figure 3, this circumstance occurs when the emissions price lies above the threshold valueτ = pω 0 ω 1 ω 0 +ω 1 , corresponding to the emission level where the two MEB This observation has an interesting corollary in terms of our analysis of the effects of a price stabilising mechanisms.…”