Timing of adoption of clean technologies, transboundary pollution and international trade

Ben Jebli, Mehdi and Ben Youssef, Slim (2012): Timing of adoption of clean technologies, transboundary pollution and international trade.

Abstract

We consider a symmetric model composed of two countries and a firm in each country. Firms produce the same good by means of a polluting technology that uses fossil energy. However, these firms can adopt a clean technology that uses a renewable energy and that has a lower unit cost. Surprisingly, opening markets to international competition increases the per-unit emission-tax and decreases the per-unit production subsidy. Interestingly, the socially-optimal adoption date under a common market better internalizes transboundary pollution than that under autarky, and than the optimal adoption date of regulated firms. However, the optimal adoption date of non-regulated firms completely don't internalize transboundary pollution. In autarky (resp. a common market), regulated firms adopt earlier (resp. later) than what is socially-optimal, whereas non-regulated firms adopt later than the socially-optimal adoption date and than the optimal adoption date of regulated firms. Therefore, in autarky (resp. a common market) regulators can induce firms to adopt at the socially-optimal adoption date by giving them postpone ( resp. speed up) adoption subsidies. Opening markets to international trade, speeds up the socially-optimal adoption date and delays optimal adoption dates of regulated and non-regulated firms.

• Item Type: MPRA Paper
• Language: English
• Keywords: Regulation, Adoption date, Renewable energy, Transboundary pollution, Common market
• Subjects: O - Economic Development, Innovation, Technological Change, and Growth > O3 - Innovation ; Research and Development ; Technological Change ; Intellectual Property Rights > O38 - Government Policy; L - Industrial Organization > L5 - Regulation and Industrial Policy > L51 - Economics of Regulation; D - Microeconomics > D6 - Welfare Economics > D62 - Externalities; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q5 - Environmental Economics > Q55 - Technological Innovation; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O13 - Agriculture ; Natural Resources ; Energy ; Environment ; Other Primary Products; O - Economic Development, Innovation, Technological Change, and Growth > O3 - Innovation ; Research and Development ; Technological Change ; Intellectual Property Rights > O32 - Management of Technological Innovation and R&D; H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H23 - Externalities ; Redistributive Effects ; Environmental Taxes and Subsidies; F - International Economics > F1 - Trade > F18 - Trade and Environment; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q2 - Renewable Resources and Conservation > Q27 - Issues in International Trade; C - Mathematical and Quantitative Methods > C7 - Game Theory and Bargaining Theory > C72 - Noncooperative Games

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