Environmental Regulations in Private and Mixed Duopolies: Emission Taxes versus Green R&D Subsidies

Lee, Sang-Ho and Park, Chul-Hi (2020): Environmental Regulations in Private and Mixed Duopolies: Emission Taxes versus Green R&D Subsidies.

Abstract

In the presence of R&D spillovers, we compare environmental regulations between an emission taxes and green R&D subsidies in private and mixed duopoly markets. We show that the green R&D subsidy is better (worse) than the emission tax when the green R&D cost is low (high) irrespective of the R&D spillovers, whereas the existence of a public firm encourages the government to adopt the subsidy policy. We then show that the optimal policy choice depends on the level of the R&D cost and the degree of R&D spillovers. In particular, when the R&D cost is high and the spillover rate is (not) weak, the government should choose the emission tax and (not) privatize the public firm. However, when the R&D cost is low, such a privatization policy is not desirable to society irrespective of the R&D spillovers.

• Item Type: MPRA Paper
• Language: English
• Keywords: emission tax; green R&D subsidy; R&D spillovers; privatization policy
• Subjects: H - Public Economics > H2 - Taxation, Subsidies, and Revenue; L - Industrial Organization > L3 - Nonprofit Organizations and Public Enterprise; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q5 - Environmental Economics > Q58 - Government Policy

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