Regulatory Choice with Pollution and Innovation / Charles D. Kolstad.

Format:

Book

Author/Creator:

Kolstad, Charles D.

Contributor:

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w16303.

NBER working paper series no. w16303

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2010.

Summary:

This paper develops a simple model of a polluting industry and an innovating firm. The polluting industry is faced with regulation and costly abatement. Regulation may be taxes or marketable permits. The innovating firm invests in R&D and develops technologies which reduce the cost of pollution abatement. The innovating firm can patent this innovation and use a licensing fee to generate revenue. In a world of certainty, the first best level of innovation and abatement can be supported by either a pollution tax or a marketable permit. However, the returns to the innovator from innovation are not the same under the two regimes. A marketable permit system allows the innovator to capture all of the gains to innovation; a tax system involves sharing the gains of innovation between the innovator and the polluting industry.

Notes:

Print version record

August 2010.