Frans P. de Vries

Market Structure and Technology Diffusion Incentives under Emission Taxes and Emission Reduction Subsidies

Rubrik: Articles
Jahrgang 163 (2007) / Heft 2, S. 256-268 (13)
Publiziert 09.07.2018
DOI 10.1628/093245607781261388
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Beschreibung
This paper compares emission taxes with emission reduction subsidies regarding the incentives they create to enhance technology diffusion under imperfect competition. Firms can adopt a »dirty« technology or a »clean« abatement technology. If the clean and dirty products are perfect substitutes, and clean firms face a net absolute advantage over dirty firms, taxes provide the strongest incentive. This ranking is reversed if there is a distortion on output. Subsidies can neutralize this distortion because output supply is stimulated, which would normally be lower than optimal under perfect competition.