Non-Tradeable Pollution Permits as Green R&D Incentives

Mehdi Fadaee () and Luca Lambertini ()

Working Paper series from Rimini Centre for Economic Analysis

Abstract: Acquired wisdom has it that the allocation of pollution rights to firms hinders their willingness to undertake uncertain R&D projects for environmental-friendly technologies. We revisit this issue in a model where firms strategically choose whether to participate in a lottery to attain pollution permits, or instead invest in green R&D, to show that, somewhat counterintuitively, a desirable side effect of the pollution permit is in fact that of fostering environmental R&D in an admissible range of the model parameters.

Keywords: environmental externalities; pollution rights; pollution-reducing innovation (search for similar items in EconPapers)
JEL-codes: L13 O31 Q55 (search for similar items in EconPapers)
Date: 2012-06
New Economics Papers: this item is included in nep-ene, nep-env, nep-ino and nep-res
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Journal Article: Non-tradeable pollution permits as green R&D incentives (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:rim:rimwps:43_12

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