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Adoption incentives and environmental policy timing under asymmetric information and strategic firm behaviour

D'Amato, Alessio; Dijkstra, Bouwe

Authors

Alessio D'Amato



Abstract

We consider the incentives of a single firm to invest in a cleaner technology under emission quotas and emission taxation. We assume asymmetric information about the firm's cost of employing the new technology. Policy is set either before the firm invests (commitment) or after (time consistency). Contrary to conventional wisdom, we find that with commitment (time consistency), quotas give higher (lower) investment incentives than taxes. With quotas (taxes), commitment generally leads to higher (lower) welfare than time consistency. Under commitment with quadratic abatement costs and environmental damages, a modified Weitzman rule applies and quotas usually lead to higher welfare than taxes.

Journal Article Type Article
Journal Environmental Economics and Policy Studies
Print ISSN 1432-847X
Electronic ISSN 1867-383X
Publisher Springer Verlag
Peer Reviewed Peer Reviewed
APA6 Citation D'Amato, A., & Dijkstra, B. (in press). Adoption incentives and environmental policy timing under asymmetric information and strategic firm behaviour. Environmental Economics and Policy Studies, https://doi.org/10.1007/s10018-017-0187-4
DOI https://doi.org/10.1007/s10018-017-0187-4
Keywords Asymmetric information, Commitment, Rime consistency, Emission taxation, Quotas
Publisher URL https://link.springer.com/article/10.1007%2Fs10018-017-0187-4
Copyright Statement Copyright information regarding this work can be found at the following address: http://eprints.nottingh.../end_user_agreement.pdf
Additional Information The final publication is available at Springer via http://dx.doi.org/10.1007/s10018-017-0187-4

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Copyright Statement
Copyright information regarding this work can be found at the following address: http://eprints.nottingham.ac.uk/end_user_agreement.pdf


techregEEPS.pdf (376 Kb)
PDF

Copyright Statement
Copyright information regarding this work can be found at the following address: http://eprints.nottingham.ac.uk/end_user_agreement.pdf





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