NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Regulatory Choice with Pollution and Innovation

Charles D. Kolstad

NBER Working Paper No. 16303
Issued in August 2010
NBER Program(s):   EEE

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.

download in pdf format
   (220 K)

email paper

This paper is available as PDF (220 K) or via email.

This paper was revised on December 5, 2011

Acknowledgments

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w16303

Published: Regulatory Choice with Pollution and Innovation, Charles D. Kolstad. in The Design and Implementation of U.S. Climate Policy, Fullerton and Wolfram. 2012

Users who downloaded this paper also downloaded these:
Bushnell w16305 The Economics of Carbon Offsets
Fowlie w16307 Updating the Allocation of Greenhouse Gas Emissions Permits in a Federal Cap-and-Trade Program
Kaplow w16268 Taxes, Permits, and Climate Change
Holland w16158 Spillovers from Climate Policy
Popp, Newell, and Jaffe w14832 Energy, the Environment, and Technological Change
 
Publications
Activities
Meetings
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us