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Licensed Unlicensed Requires Authentication Published by De Gruyter August 11, 2008

Environmental Policy and Uncertain Arrival of Future Abatement Technology

  • Andreas von Döllen and Till Requate

Abstract

We study long-term incentives for regulated polluting firms to invest in advanced abatement technologies when some new technology is available but even better technology is expected for the future. Firms can invest only once. We find that, depending on the cost of adoption, all possible investment patterns can occur in social optimum. Further, a regulator who anticipates the arrival of the new technology can decentralize the socially optimal allocations by announcing either a Pigouvian tax or tradable permits and by setting ex post optimal policy levels after firms have invested.

Published Online: 2008-8-11

©2011 Walter de Gruyter GmbH & Co. KG, Berlin/Boston

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