energy market liberalization and renewable energy policies in oecd countries abstract this paper investigates the effect of energy liberalization compared to other drivers on policies that support renewable energy in a long panel of oecd countries we estimate this effect by accounting for the endogeneity of liberalization related to joint decisions within a country s energy strategy using regulation in other industries as instruments we find that energy liberalization increases public support for renewable energy the effect of liberalization is the second largest after the effect of per capita income and is mostly driven by reductions in entry barriers while the effect of privatization is unclear this finding suggests that a reduction in the monopolistic power of state owned utilities has a positive effect on renewable energy policies when various types of actors are ensured access to the grid instead of it being provided to only a few large private firms

a model of principal agency control of wastes under technological progress we analyze performance and outcome of principal agency relationships in an environment with pollution externalities and technological progress we assume that firms may not purposely violate the pollution control regulations but nonetheless generate some pollution due to negligence the models allow firms two possible actions either to increase the level of treated waste legally or pay an expected penalty if illegal pollution is detected we show that in a world with pollution externalities technological progress does not guarantee increases in the welfare level most important for policy purposes the analysis shows the trade offs between the policy instruments penalties taxes subsidies and treatment costs in a world where technological progress occurs and firms may violate the law

using a policy mix for pollution control a review of economic literature this article provides a review of economic studies analyzing the use of multiple policies a socalled policy mix to cope with single pollution problems to guide and structure the review an analytical framework is developed and applied the framework integrates transaction costs into the analysis of pollution problems and policies to overcome them moreover it understands a pollution externality not only as a market failure but more generally as the failure of private governance structures based on this insight two rationales for using a policy mix are identified first a policy mix may help to correct for multiple reinforcing failures of private governance structures such as pollution externalities and technological spillovers second a policy mix can be employed if the implementation of single first best policies brings about high transaction costs e g when marginal pollution damages are heterogeneous or polluters are unlikely to comply with the policy for each rationale the relevant literature is presented based on the review avenues for future research are identified

environmental regulation technological diversity and the dynamics of technological change inducing technological progress is an important objective of environmental regulation we investigate under which conditions regulation induced technological progress pursues the best technological option we analyze a setting with vertical and horizontal technological progress cost uncertainty time limited patent protection and a case that is typical for some emissi4on intensive industries like electricity generation or the chemical industry under taxes and standards only the current least cost technology is used and developed implying a lock in into a possibly inferior technology tradable permits yield slower progress but can facilitate the simultaneous development of technologies rendering lock ins less likely

joint management of emission abatement and technological innovation for stock externalities we investigate how emission abatement and technological innovation provide different solutions to reduce pollutant emissions in the case of a stock externality emission abatement leads to a smooth and continuous adjustment of emissions conversely technological innovation has to be interpreted as an option on a less polluted environment and can justify the use of a pollution threshold above which it is optimal to start a research and development programme for a less polluting technology it is shown that technological innovation interferes with the traditional emission abatement approach the optimal abatement level is logically lowered once the less polluting technology is available nevertheless a temporary increase in emissions is optimal during the research and development period the usual pigouvian tax system proves to remain an efficient corrective instrument a numerical application to the greenhouse effect is provided

a derivation of the marginal abatement cost curve abstract the relationship between a firm s technology and its marginal abatement cost mac curve is explored even under the simplest specifications the mac curve will be kinked at some point except under a special assumption which in reality could easily be violated the nondifferentiability implies that the choice of instrument under uncertainty may depend on the targeted level of emissions reduction also stability conditions for dynamic tax mechanisms may be violated in the neighborhood of the kink point a policy implication is that in some cases output restrictions are as efficient as emissions restrictions in contrast to previous results

power sector reform and co2 abatement costs in korea abstract the current korean administration is driving change in the power sector by gradually phasing out nuclear power plants expanding the use of renewable energy and imposing restrictions on the operation of coal power plants considering these changes the marginal abatement cost mac curve would provide crucial information to determine an appropriate greenhouse gas reduction target especially for 2030 this study derives the mac curves for the korean power sector in 2030 using a bottom up optimization model with three scenarios based on different carbon pricing schedules in addition the carbon price required to achieve the co2 emission targets in the korean power sector in 2030 are estimated the results show that a carbon price of 135 157 us tco2 would be required to achieve the 2030 emission target for the power sector by comparing the mac curves of three different scenarios we can reiterate the fact that early action regarding climate change mitigation is more effective and efficient than delayed action

prices vs quantities the effects on technology choice abstract it is well known that price and quantity based regulation approaches provide different investment incentives but usually only the effect on the level of investment is studied in this paper we show that under uncertainty they also lead to the adoption of different technologies due to the disparate risks that a regulated firm is exposed to different regulatory instruments induce different technologies and this effect cannot be compensated by varying the design of the instruments furthermore price based instruments lead to the adoption of a socially suboptimal technology so that the inclusion of technology choice provides a bias in favor of a quantity based regulation compared with weitzman s weitzman m l 1974 prices vs quantities review of economic studies 41 477 491 criterion

what are the key drivers of mac curves a partial equilibrium modelling approach for the uk marginal abatement cost mac curves are widely used for the assessment of costs related to co2 emissions reduction in environmental economics as well as domestic and international climate policy several meta analyses and model comparisons have previously been performed that aim to identify the causes for the wide range of mac curves most of these concentrate on general equilibrium models with a focus on aspects such as specific model type and technology learning while other important aspects remain almost unconsidered including the availability of abatement technologies and level of discount rates this paper addresses the influence of several key parameters on mac curves for the united kingdom and the year 2030 a technology rich energy system model uk markal is used to derive the mac curves the results of this study show that mac curves are robust even to extreme fossil fuel price changes while uncertainty around the choice of the discount rate the availability of key abatement technologies and the demand level were singled out as the most important influencing factors by using a different model type and studying a wider range of influencing factors this paper contributes to the debate on the sensitivity of mac curves

should renewable energy policy be renewable political flexibility brings about trade offs for policy makers aiming to support the deployment of renewable energy sources res on the one hand it allows incorporating new information on ex ante uncertain benefits and costs of res policy on the other hand it may deter res investments this paper scrutinizes how these trade offs play out economically and politically when res policy makers choose the degree of flexibility as well as the instruments to implement flexibility the analysis builds on a theoretical framework distinguishing between flexibility by design and by adjustment it is complemented by a discussion of three case studies res support schemes in germany and the united kingdom and the eu emissions trading scheme theoretical as well as empirical results suggest that the politically chosen degree of flexibility by policy design may be sub optimally low in contrast flexibility by policy adjustment is often excessively high

firm incentives to promote technological change in pollution control reply abstract the process of technological change in pollution control is broken into three basic steps innovation diffusion and optimal agency response firm incentives to promote these steps are then examined under five regulatory regimes direct controls emission subsidies emission taxes free marketable permits and auctioned marketable permits on a relative basis emission taxes and auctioned permits provide the highest firm incentives to promote technological change at times free permits generate lower incentives direct controls which are common regulatory tools usually provide the lowest relative firm incentives to promote technological change

regulatory balancing and the efficiency of green r d we identify and analyse several dynamic implications of setting environmental standards such as to balance marginal costs and benefits the adoption of such a regulatory approach is shown to effect i the speed of improvement of abatement technologies ii the direction in a sense to be defined of that improvement iii its source and the distribution of the rents from it and iv the rate of development of defensive averting technologies existing views are thoroughly synthesised in the context of a simple diagrammatic model several new results are derived and at least one conventional wisdom questioned the message of the analysis for legislators and regulators is that cost benefit balancing should be done with care

private sector involvement in the resolution of financial crises how do markets react abstract to correct the disincentives of liquidity assistance during financial crises the official sector attempts to involve the private sector in the resolution of debt crises this paper empirically tests the reaction of investors to announcements of private sector involvement psi for this purpose we disentangle shifts in risk premia incorporated in excess returns on emerging market bonds into changes in risk and shifts in the price of risk a regime switching arch m model is employed to separate two regimes with respect to the market price of risk while psi has no effect on risk it is shown that the likelihood of switching to a state with a high price of risk rises in response to psi announcements thus the results indicate that burden sharing was credible and hence effective

environmental innovation and the cost of pollution abatement revisited it is widely assumed in the literature that environmental innovation reduces the marginal cost of pollution abatement in this paper we show that this is not necessarily the case and we provide some unexpected outcomes

an optimization model for a monopolistic firm serving an environmentally conscious market use of chemical reaction optimization algorithm this work considers a monopolist firm which faces the following twin challenges of serving an environmentally sensitive market the first challenge is the demand s elasticity to emissions and price to entice its emission conscious customers and generate higher demand the firm incrementally invests in cleaner production technologies it also adopts a voluntary limit on its emissions from transportation however such investments and penalty lead to the second challenge of reduced net profit to address above trade off a non linear programming nlp model with a maximization quadratic profit function has been formulated recently developed chemical reaction optimization algorithm with superior computational performance has been adopted to solve the nlp the output of the model provides near optimal monopolistic price best attainable reduction in manufacturing emissions through proportional investment and makes a choice of suitable mode of transportation for each type of product offered by the firm three types of sensitivity analyses were performed by varying contextual parameters customers emission elasticity penalty charged per unit emission and investment coefficient the results underpin the importance of investments in cleaner technologies and the need of financial aids for profit maximizing firms operating in cleaner markets this work provides a decision making tool to determine the near optimal degree of each of the above dimension in multiple business fronts

the hotspots reference routes and research trends of marginal abatement costs a systematic review abstract as one of the most effective means of evaluating environmental policies marginal abatement costs macs have been adopted in a growing body of research this study characterizes the mac related literature from 1993 to 2018 on web of science based on a systematic review bibliometric analysis and mind mapping the results classify the research hotspots into influential factors methods and empirical applications the three most frequently mentioned influential factors are technical change discount rates and energy prices compared with top down models bottom up models including engineering model and expert based method are the most widely used improvements in the former focus on strengthening market behavior effect while those in the latter aim to overcome the weaknesses of negative costs and lack of interaction across measures mac applications focus on environmental policies with two new research areas recently emerging co benefits and sectoral abatement costs furthermore a reference route is proposed by summarizing the applicability of methods and matching relationships among influential factors methods and empirical problems finally potential research directions are summarized based on the identified research hotspots and a similar co word analysis in marginal cost field such as considering the effects of both multiple influential factors and the interaction among factors on maccs

second best energy policies for heterogeneous firms this paper investigates second best issues in the regulation of external costs of energy use by heterogeneous firms the efficiency of regulatory energy policies depends in general on the policy incentives given for both output reduction and input substitution the resulting endogeneity of firms supply functions appears to lead to complicated policy rules in contrast to earlier efforts the analysis considers an arbitrarily large number of non identical price taking firms in a joint market a large variety of possible production functions including varying levels of economies of scale and possibilities for input substitution and elasticities of market demand which may vary from completely elastic to completely inelastic two second best instruments are considered namely output taxes and energy efficiency standards and are compared to the benchmark of first best energy taxes the underlying market factors determining the relative efficiency of these second best instruments when used optimally are identified

uncertainty over future environmental taxes impact on current investment in resource conservation besides static efficiency properties environmental policies should be evaluated in terms of their longer run impacts on investment and technological change to reduce pollution and degradation of natural resources using a stochastic dynamic programming approach this paper analyzes how uncertainty about a future environmental tax on a polluting input alters investment in resource conservation and how such investment affects future demand for the polluting input the impact on investment depends crucially on price elasticities of demand and on the manner in which investment shifts and rotates the demand schedule for the polluting input in the future the expectation of a higher tax does not necessarily create stronger incentives for investment in resource conservation more uncertainty about future policies does encourage investment if it makes a firm more responsive to future price changes and discourages investment if it makes a firm less responsive to price changes

environmental policy incentives to adopt advanced abatement technology abstract we investigate incentives through environmental policy instruments to adopt advanced abatement technology first we study the case where the regulator makes long term commitments to policy levels and does not anticipate arrival of new technology we show that taxes provide stronger incentives than permits auctioned and free permits offer identical incentives and standards may give stronger incentives than permits second we investigate scenarios where the regulator anticipates new technologies we show that with taxes and permits the regulator can induce first best outcomes if he moves after firms have invested whereas this does not always hold if he moves first

does technological innovation really reduce marginal abatement costs some theory algebraic evidence and policy implications the existing literature models innovation in pollution control as a reduction in marginal abatement costs we show that this assumption is inappropriate for production process innovations such as fuel switching algebraically we examine the effects of different innovation types on marginal abatement cost curves showing that some desirable innovations increase marginal abatement costs empirically we estimate marginal abatement costs for sulfur dioxide by measuring the output distance function for electric power in korea regression results confirm that production process innovations did raise marginal abatement costs in this case one policy implication economic instruments do not always provide stronger innovation incentives than command and control policies

quantifying co2 abatement costs in the power sector co2 cap and trade mechanisms and co2 emission taxes are becoming increasingly widespread to assess the impact of a co2 price marginal abatement cost curves maccs are a commonly used tool by policy makers providing a direct graphical link between a co2 price and the expected abatement however such maccs can suffer from issues related to robustness and granularity this paper focuses on the relation between a co2 emission cost and co2 emission reductions in the power sector the authors present a new methodology that improves the understanding of the relation between a co2 cost and co2 abatement the methodology is based on the insight that co2 emissions in the power sector are driven by the composition of the conventional power portfolio the residual load and the generation costs of the conventional units the methodology addresses both the robustness issue and the granularity issue related to maccs the methodology is based on a bottom up approach starting from engineering knowledge of the power sector it offers policy makers a new tool to assess co2 abatement options the methodology is applied to the central western european power system and illustrates possible interaction effects between e g fuel switching and renewables deployment

carbon trading in the policy mix the kyoto protocol is stimulating the development of emissions trading schemes at the national and international levels these are being introduced alongside existing policy instruments such as carbon taxes and negotiated agreements leading to complex problems of policy interaction but the topic of policy interaction remains under researched this paper aims to improve understanding of such interactions by examining the conditions under which a cap and trade scheme for carbon dioxide emissions may usefully coexist with carbon energy taxes support mechanisms for renewable electricity and policies to promote energy efficiency the paper argues that each of these instrument combinations may be acceptable provided they contribute to either improving the static or dynamic efficiency of the trading scheme or delivering other valued policy objectives but since the coexisting instruments may raise overall abatement costs while contributing nothing further to emission reductions the objectives and trade offs within the policy mix must be explicit

investment incentives under emission trading an experimental study this paper presents the results of an experimental investigation on incentives to adopt advanced abatement technology under emissions trading our experimental design mimics an industry with small asymmetric polluting firms regulated by different schemes of tradable permits we consider three allocation auction policies auctioning off costly permits through an ascending clock auction grandfathering permits with re allocation through a single unit double auction and grandfathering with re allocation through an ascending clock auction our results confirm both dynamic and static theoretical equivalence of auctioning and grandfathering we nevertheless find that although the market institution used to reallocate permits does not impact the dynamic efficiency from investment it affects the static efficiency from permit trading

tightening environmental standards the benefit cost or the no cost paradigm ms ff ichael porter and claas van der linde have written a paper that is interesting and to us at least somewhat astonishing it is a defense of environmental regulation indeed an invitation to more stringent regulation that makes essentially no reference to the social benefits of such regulation this approach contrasts starkly with the methods that economists and other policy analysts have traditionally used when assessing environmental or other regulatory programs the traditional approach consists of comparing the beneficial effects of regulation with the costs that must be borne to secure these benefits for environmental regulation the social benefits include the reductions in morbidity or premature mortality that can accompany cleaner air the enhanced recreational opportunities that can result from water quality improvements the increased land values that might attend the cleanup of a hazardous waste site the enhanced vitality of aquatic ecosystems that might follow reductions in agricultural pesticide use or any of the other potentially significant benefits associated with tighter standards from this benefit cost approach emerges the standard tradeoff discussed in virtually every economics textbook porter and van der linde deny the validity of this approach to the analysis of environmental regulation claiming it to be an artifact of what they see as a static mindset in their view economists have failed to appreciate the capacity of

technical change and the marginal cost of abatement abstract we address one aspect of the treatment of technical change in the environmental economics literature how technical change impacts the marginal cost of abatement we review a selection of papers that employ a variety of representations of technical change and show that these representations have quite different and sometimes surprising effects on the marginal costs of pollution reductions we argue that these varied representations in fact correspond to a variety of different technology options we then present results indicating that this representation matters the impacts of technical change on the marginal cost of abatement can crucially impact policy analysis

learning about environmental damage implications for emissions trading in this paper the impact of adjusting the supply of tradeable emission permits on incentives for cleaner technology adoption is examined two policy rules for adjusting the supply of permits are considered open market operations and a proportional adjustment rule under which the regulator expropriates permits from individual firms in proportion to their existing permit holdings adjustment via open market operations is neutral with respect to cleaner technology investment decisions but may be politically difficult to implement the proportional adjustment rule is also neutral with respect to investment decisions and at the same time allows more flexibility from a political perspective

incentives to diffuse advanced abatement technology under environmental liability law polluting firms with advanced abatement technology at their disposal have incentives or disincentives to share this technology with other polluting firms the direction and extent of those incentives depends on the liability rule applicable and the way technical change impacts marginal abatement costs we establish that incentives for diffusion are socially optimal under strict liability and socially suboptimal under negligence if technical change lowers marginal abatement costs for all levels of abatement negligence may however induce better diffusion incentives than strict liability if technical change decreases increases marginal abatement costs for low high levels of abatement

supply and demand factors of cleaner technologies some empirical evidence this article identifies and analyzes factors that affect the willingness of firms and consumers to develop and adopt cleaner technologies cleaner technologies is used as a general term for pollution abatement technologies re use systems and environmentally sound consumer products and materials the article also contains the findings of three case studies on cleaner technologies cfc substitutes low solvent paints and coatings and membrane technology in which the importance of the identified factors is investigated from the case studies some general conclusions are drawn about these factors and the way in which policy instruments can be used to stimulate innovation in and diffusion of cleaner technologies no single policy instrument is considered to be optimal instead a policy mix is needed involving a much wider use of economic instruments

effects of policies on patenting in wind power technologies abstract this paper explores the effects of policies and other factors driving innovation in wind power technologies in twelve oecd countries over more than two decades patent counts are used as an indicator for innovation the factors considered are generally derived from the systems of innovation literature count data econometric model were used for the estimations the suggest that patenting in wind power technology is positively related to public r d in wind power reflecting supply side policy the stock of wind capacity reflecting learning effects the number of patents per capita reflecting a country s innovative capacity and the share of green party voters reflecting the legitimacy of the technology in particular the presence of production or capacity targets for wind power or renewable energy sources and a stable policy environment reflecting policy process appear to be favourable for patenting wind power technologies these results are robust to various model specifications distributional assumptions and alternative classifications of wind power technologies in the patent search

environmental policy stringency and technological innovation evidence from survey data and patent counts this article uses patent data to examine the impact of public environmental policy on innovations in environment related technology the analysis is conducted using data on an unbalanced panel of 77 countries between 2001 and 2007 drawing upon data obtained from the european patent office epo world patent statistical patstat database and the world economic forum s wef executive opinion survey the results support our hypotheses concerning the positive role of both general innovative capacity and environmental policy stringency on environment related innovation a subsequent two stage model assesses the factors which drive innovation in general and uses the fitted values to estimate environmental innovation while the analysis is conducted on a smaller sample they confirm the findings of the reduced form model

economic growth international competitiveness and environmental protection r d and innovation strategies with the warm model abstract it is often argued that policies designed to protect the environment may harm economic growth moreover if introduced unilaterally by a given country they may reduce the competitiveness of domestic firms these arguments are generally based on the assumption that environmental protection has to be achieved through the introduction of emission charges e g a carbon tax however three issues need to be raised first the tax is not the only policy instrument and is not the most efficient one that can be used to reduce polluting emissions secondly even when a tax policy is implemented it is important to assess the feedback effects induced by recycling the tax revenue thirdly and most importantly the role of technical progress cannot be neglected therefore there may exist a policy mix that provides firms with the correct incentives to adopt energy saving technologies and to invest in environment friendly r d the first two issues have partly been explored both in the theoretical and empirical literature the third issue i e the role of incentives to technical progress still lacks adequate quantitative assessment this is why a new model has been developed which endogenizes technical progress and its effects and feedbacks on economic energy and environmental variables using warm an econometric general equilibrium model for the european union and for each member country this paper presents simulation results up to 2015 of the effects of some industrial environmental policies which are aimed at protecting the environment without necessarily damaging competitiveness and economic growth the results show that policies that stimulate environmental r d technological innovation and diffusion may provide firms with the correct incentives to avoid damaging the environment while preserving their competitiveness in the market moreover such a policy based both on r d subsidies and on innovation incentives may not worsen the public sector budget balance as a result of the positive effects on economic growth

environmental policy with endogenous technology from a game theoretic perspective the case of the us pulp and paper industry the merits of different types of regulatory tools in eliminating pollution and at the same time inducing innovation have long been an interest of researchers in both environmental economics and industrial organization although there is a substantial theoretical literature investigating the potential for various environmental policies to attain these dual goals this is a challenging empirical problem because every industry has its own inherent characteristics that play an important role in determining the performance of different regulatory tools the majority of the work to date focuses on pollution abatement while leaving pollution prevention understudied in most of the literature firms are also assumed to be symmetric asymmetries among firms add another degree and level of complexity to their strategic interactions and affect the performance of different regulatory tools this paper investigates the performance of two alternative regulatory tools an emissions performance standard and an emissions tax in reducing pollution and inducing pollution prevention and abatement r d in the us pulp and paper industry we construct a model representing the industry in an asymmetric cournot duopoly framework calibrate the model to disaggregated industry data and run scenarios to replicate the behavior of the firms in an imperfectly competitive output market our results suggest that pollution prevention r d can respond quite differently than abatement r d to different policy instruments the results indicate that r d spillovers among firms play crucial role in technology development and strategies of the firms our results also suggest that strategic interactions between firms in an imperfectly competitive industry can have significant impacts of the levels of both types of r d

climate policies for road transport revisited ii closing the policy gap with cap and trade current policies in the road transport sector fail to deliver consistent and efficient incentives for greenhouse gas abatement see companion article by creutzig et al in press market based instruments such as cap and trade systems close this policy gap and complement traditional policies that are required where specific market failures arise even in presence of strong existing non market policies cap and trade delivers additional abatement and efficiency by incentivizing demand side abatement options this paper analyzes generic design options and economic impacts of including the european road transport sector into the eu ets suitable points of regulation are up and midstream in the fuel chain to ensure effectiveness cover all emissions and avoid double counting efficiency incentivize all abatement options and low transaction costs based on year 2020 marginal abatement cost curves from different models and current eu climate policy objectives we show that in contrast to conventional wisdom road transport inclusion would not change the eu ets allowance price hence industrial carbon leakage induced by adding road transport to the eu ets may be less important than previously estimated

commitment versus discretion in climate and energy policy to decarbonize the power sector policy makers need to commit to long term credible rules for climate and energy policy otherwise risk of opportunistic policy making will impair investments into low carbon technologies however the future benefits and costs of decarbonization are subject to substantial uncertainties thus there may also be societal gains from allowing policy makers the discretion to adjust the policies as new information becomes available we examine how this trade off between policy commitment either unconditional or state contingent and discretion affects the optimal intertemporal design of market based instruments in the power sector using a dynamic partial equilibrium model we show that commitment to a state contingent level of ambition for the market based instrument leads to higher welfare than both unconditional commitment and discretion with benefit uncertainty the choice between the practically more feasible approaches of unconditional commitment and discretion is analytically ambiguous a basic numerical illustration suggests that policy discretion may outperform unconditional commitment in terms of welfare however this result is reversed when only a limited fraction of benefit uncertainty resolves in reasonable time when future policy makers have own agendas or when investors are risk averse with cost uncertainty policy discretion is welfare superior if the government can commit to a technology deployment target

what triggers environmental management and innovation empirical evidence for germany abstract it is frequently hypothesized that environmental management systems emss may improve firms environmental innovation performance whether this hypothesis is true is as critical for environmental policy as questions pertaining to the relevant incentives for 1 a firm s voluntary adoption of an ems and 2 its environmental innovation behavior based on ample empirical evidence for german manufacturing this paper addresses the simultaneity of these issues on the basis of a recursive bivariate probit model that explores the hypothesis that a facility s decision on innovation activities is correlated with the decision on ems adoption our empirical results indicating that environmental innovation activities are not associated with ems implementation nor any other single policy instrument reflect the perceptions of the survey respondents and hence should be interpreted as correlations rather than causal relationships according to these perceptions innovation behavior seems to be mainly correlated with the stringency of environmental policy

emissions pricing spillovers and public investment in environmentally friendly technologies in a second best world of below optimal pollution pricing the public return to r d may be greater than under pigouvian pricing due to excess benefits of increasing abatement or it may be lower since private actors lack the incentives to take full advantage of the new cleaner technologies this paper uses a simple model to demonstrate the interaction between environmental policies r d externalities and the social return to innovation the results indicate that strong public support for innovation in abatement technologies is only justified if at least a moderate emissions policy is in place and spillover effects are significant if emissions policy can adjust to cost changes the public role may be enhanced since private actors will prefer to avoid ratcheting social gains from innovation increase only if innovation can allow emissions to be more fully priced technology policy is more effective with fuller emissions pricing and is better viewed as a complement to than a substitute for mitigation policy

optimal climate change policies when governments cannot commit this paper examines the optimal design of climate change policies in the context where governments want to encourage the private sector to undertake significant immediate investment in developing cleaner technologies but the carbon taxes and other environmental policies that could in principle stimulate such investment will be imposed over a very long future the conventional claim by environmental economists is that environmental policies alone are sufficient to induce firms to undertake optimal investment however this argument requires governments to be able to commit to these future taxes and it is far from clear that governments have this degree of commitment we assume instead that governments cannot commit and so both they and the private sector have to contemplate the possibility of there being governments in power in the future that give different relative weights to the environment we show that this lack of commitment has a significant asymmetric effect compared to the situation where governments can commit it increases the incentive of the current government to have the investment undertaken but reduces the incentive of the private sector to invest consequently governments may need to use additional policy instruments such as r d subsidies to stimulate the required investment

biodiversity and optimal policies towards r d and the growth of genetically modified crops in this paper we provide a simple model illustrating the possible nature ofgovernment policy with regards to genetic modification taking into accountits impact on the environment we show that it is necessary not only tointervene in the growing of crops but also to intervene in r d througha tax on the adoption of new gm technology without intervention at bothlevels both the cultivation of gm crops and the rate of innovation in gm willexceed their socially optimal levels

an assessment of household electricity load curves and corresponding co2 marginal abatement cost curves for gujarat state india gujarat a large industrialized state in india consumed 67 twh of electricity in 2009 10 besides experiencing a 4 5 demand supply short fall residential sector accounted for 15 of the total electricity consumption we conducted load research survey across 21 cities and towns of the state to estimate residential electricity load curves share of appliances by type and usage patterns for all types of household appliances at utility geographic appliance income and end use levels the results indicate that a large scope exists for penetration of energy efficient devices in residential sector marginal abatement cost mac curves for electricity and co2 were generated to analyze relative attractiveness of energy efficient appliance options results indicate that up to 7 9 twh of electricity can be saved per year with 6 7 mt co2 emissions mitigation at negative or very low co2 prices of us 10 t co2 despite such options existing their penetration is not realized due to myriad barriers such as financial institutional or awareness and therefore cannot be taken as baseline options for co2 emission mitigation regimes

banks versus markets a response to kucinskas abstract this is a response to kucinskas 2016 who comments on my article zimper 2013

marginal abatement costs of co2 emission reductions geographical flexibility and concrete ceilings an assessment using the poles model abstract the kyoto protocol envisage the setting up of flexibility mechanisms allowing annex b countries to fulfil their commitments to reducing greenhouse gases with respect for the principle of economic efficiency the current negotiations relate in particular to the possibility of setting up a system of tradable emissions permits for annex b countries and also of introducing ceilings to trade this paper analyses the stakes and economic potential of adopting this instrument both for those countries that made commitments in kyoto and for developing countries it is based on a formal approach that allows for a consistent framework of analysis the emission permit market is in fact simulated on the basis of a reference scenario and of marginal abatement cost curves and estimated by the poles model after analysing these marginal abatement cost curves and comparing them with those produced by other models we explore two different configurations for a competitive market a market limited to the annex b countries and a world market the results produced by the model show that widening the market to include developing countries is more effective than the annex b market solution it reduces the cost of implementing kyoto for oecd countries and at the same time allows the countries of the south to benefit from selling the permits this research also shows that introducing restrictions on exchanges for annex b countries could have a counter productive redistribution effect with the ethical argument that underlies that particular measure

marginal abatement costs of greenhouse gas emissions a meta analysis in this paper we carry out a meta analysis of recent studies into the costs of greenhouse gas mitigation policies that aim at the long term stabilisation of these gases in the atmosphere we find the cost estimates of the studies to be sensitive to the stringency of the stabilisation target the assumed emissions baseline the way in which the time profile of emissions is determined in the model the choice of control variable co2 only versus multigas the number of regions and energy sources in the model and to a lesser degree the scientific forum in which the study was developed we find that marginal abatement costs of the stringent long term targets that are currently considered by the european commission are still very uncertain but might exceed the costs that have been suggested by recent policy assessments

investment in risky r d programs in the face of climate uncertainty we analyze how the socially optimal technology rd and that uncertainty in damages interacts with uncertainty in the returns to rd and r d that reduces the emissions to output ratio and argue that this is a good representation of r d into fossil fuel technologies for r d programs into non carbon technologies optimal investment is higher in riskier programs our empirical model indicates that the optimal investment in a risky program is about 3 1 2 times larger than in a program with certain returns for r d programs aimed at reducing emissions in fossil fuel based technologies our results show that qualitatively investment is higher in less risky programs under most uncertain damage scenarios our empirical model shows however that the risk profile of fossil fuel based r d programs generally has little quantitative impact on optimal investment the exception is that when the probability of a catastrophe inducing full abatement is very high investment is about twice as high in risky programs compared to programs with certain returns

clean technology innovation and environmental regulation the development and diffusion of clean technologies has an important role to play in preventing pollution government must address the issue of how firms can be given the necessary incentive to develop environmentally sound production techniques and products this paper focus on how subsidies can under certain restrictive conditions stimulate innovation subsidization is usually assumed to involve unit subsidies for pollution reduction unit subsidies have little to do with the subsidy schemes in actual use our focus is on subsidy schemes specifically designed to promote the development of clean technologies through the use of grants financial aid based on data from the development projects initiated through the danish clean technology programme we analyze how environmental innovations take place when the polluters their suppliers and consultants are actively engaged in the development processes the main merit of subsidy schemes like the danish one is its direct focus on the innovation processes and the active incorporation of the network of firms surrounding the polluters our findings lead us to conclude that when it comes to subsidization the role of government should be redefined government can act as a matchmaker by providing firms with informative incentives and necessary contacts for finding more efficient technological solutions to specific environmental problems

incentives precision technology and environmental protection abstract this paper calls for a reevaluation of the pollution problem in order to devise efficient strategies for its control it contends that a fundamental cause of pollution is inefficiency in input use during the production process this inefficiency manifests itself as input waste and polluting residues precision technologies can increase the effectiveness of inputs used in production and reduce pollution generation despite their potential economic and ecological benefits adoption of precision technologies has been slow this paper presents a conceptual framework to identify and analyze the specific factors that affect their diffusion among microunits these include various heterogeneous characteristics of microunits prices which do not reflect the relevant scarcities due to distortionary regulatory policies and lack of institutional mechanisms for efficient allocation of inputs and outputs it rationalizes the observed variations in the appropriate choice of technology across microunits and argues for the need to broaden the range of incentive based instruments for environmental protection beyond pollution taxes

incentives for technological development bat is bad this paper examines the effect of environmental regulation on a firm s incentives to invest in developing cheaper clean up technologies in a model where consumers are willing to pay for environmentally clean technologies it focuses on two types of policies a bat based policy and a commitment policy in the former policy the standard is based on the best available technology bat where the regulator re optimizes environmental regulation in response to new technologies however under a commitment policy the regulator announces a regulation and sticks to it irrespective of the firm s adopted technology the paper finds that cleaner technologies are not adopted if the regulator announces a bat based policy a commitment policy not only leads to positive investment in research and development but is also welfare improving

distribution of environmental costs and benefits additional distortions and the porter hypothesis the porter hypothesis argues that environmental regulations benefit firms by fostering innovation we discuss four examples consistent with this idea highlighting either the distribution of benefits or costs or the presence of some additional distortion other than pollution examples are organized according to the list of market failures adding any one market failure creates the possibility that firms benefit from regulations while each example can be fully consistent with the porter hypothesis it is also possible that regulations benefit firms even without fostering innovation a result that would be empirically difficult to distinguish from the porter hypothesis

when are banks better than markets comment on zimper 2013 zimper 2013 claims that in the basic diamond dybvig model trade in a competitive asset market can implement the first best i show that the argument of zimper is incorrect as it stands zimper derives his result assuming that the consumers choose investment levels that are individually suboptimal the corrected argument shows that laissez faire markets do not provide any liquidity insurance however if consumers can trade in markets in the banking economy banks do not provide any insurance either whether or not banks are better than markets therefore crucially depends on the extent of trading restrictions

on the welfare equivalence of asset markets and banking in diamond dybvig economies why do people choose bank deposit contracts over a direct participation in asset markets in their seminal paper diamond and dybvig s 1983 answer this question by claiming that bank deposit contracts can implement allocations that are welfare superior to asset markets equilibria the present paper demonstrates that this claim is false whenever the asset market participants are highly rational

stock returns and volatility an empirical study of the uk stock market abstract attempts to quantify the relationship between stock returns and volatility have produced conflicting conclusions in recent u s studies our paper examines this issue in the u k context for the first time using daily weekly fortnightly and monthly returns on the financial times all share index from january 1965 to december 1989 volatility estimates are obtained from monthly sample variances and arch models expected returns are shown to have had a positive though not statistically significant relationship with expected volatility the relationship between the unexpected components of the returns and volatility series is less clear we find evidence for a negative relationship but only when volatility expectations are represented by standard deviations

choosing a monetary value of greenhouse gases in assessment tools a comprehensive review there is a societal need for using monetary estimates of social impacts of co2 and other greenhouse gases in different assessment tools such as cost benefit analysis and life cycle assessment a number of estimates are available in the literature since these differ by several orders of magnitude there is ambiguity and confusion about which to use this review aims to give some guidance on this issue the variation in carbon value estimates depends on several uncertain aspects which will remain uncertain including climate sensitivity assumptions about future emissions and decision makers ethical standpoints hence there is no single correct monetary value for co2 it will depend on the ethical standpoint of the user due to this estimates of social costs of co2 emissions cannot be used for calculating an optimal emission level although they can inform such assessments it is suggested that marginal abatement cost values are used for emissions capped by binding targets in short term assessments and that social cost of carbon values should be used for all other emissions benchmark principles for choosing a monetary carbon value are suggested along with associated estimates depending on the choices made with regard to ethical standpoints and assumptions about future emissions and climate sensitivity estimates can be significantly higher than the ones typically used in assessment tools today the estimates need continuous updating and there is need for better understanding and communication around the limitations and uncertainties involved

marginal abatement cost curves for policy recommendation a method for energy system analysis abstract the transport sector is seen as one of the key factors for driving future energy consumption and greenhouse gas ghg emissions in order to rank possible measures marginal abatement cost curves have become a tool to graphically represent the relationship between abatement costs and emission reduction this paper demonstrates how to derive marginal abatement cost curves for well to wheel ghg emissions of the transport sector considering the full energy provision chain and the interlinkages and interdependencies within the energy system presented marginal abatement cost curves visualize substitution effects between measures for different marginal mitigation costs the analysis makes use of an application of the energy system model generator times for south africa times geeco for the example of gauteng province this study exemplary shows that the transport sector is not the first sector to address for cost efficient reduction of ghg emissions however the analysis also demonstrates that several options are available to mitigate transport related ghg emissions at comparable low marginal abatement costs this methodology can be transferred to other economic sectors as well as to other regions in the world to derive cost efficient ghg reduction strategies

determinants of environmental innovation new evidence from german panel data sources abstract in most cases empirical analyses of environmental innovations based on firm level data relied on surveys for one point in time these surveys allow for the inclusion of many explanatory variables such as different policy instruments or the influence of pressure groups but it is not possible to address the dynamic character of environmental innovations this paper uses two german panel databases the establishment panel of the institute for employment research iab and the mannheim innovation panel mip of the centre for european economic research zew to explore the determinants of environmental innovations the econometric estimations show that the improvement of the technological capabilities knowledge capital by r d triggers environmental innovations environmental regulation environmental management tools and general organizational changes also encourage environmental innovation a result that has also been postulated by the famous porter hypothesis

a note on clean technology adoption and its influence on tradeable emission permits prices in this paper we give an example in which the price of tradable emission permits increases despite firms adoption of less polluting technology a result that is in contrast with montero j environ econ 44 23 44 2002 and parry j regul econ 14 229 254 1998 among others if two cournot players switch to a cleaner technology the price for permits may increase due to an increase in the net demand for permits and a decrease in the net supply of permits after the clean technology is adopted this is only the case when output demand is quite elastic

tradable emission rights and strategic interaction the use of tradable emission rights as environmental policy instruments may affect the conditions for strategic interaction between regulated firms and thus have implications for competition policy this paper presents an analysis of how and under what conditions emission rights can be used strategically by oligopolistic firms for predatory and exclusionary purposes

efficiency in pollution control in the short and long runs a system of rental emission permits efficiency in pollution control in the short and long runs a system of rental emission permits author s robert a collinge and wallace e oates source the canadian journal of economics revue canadienne d economique vol 15 no 2 may 1982 pp 346 354 published by blackwell publishing on behalf of the canadian economics association stable url http www jstor org stable 134787 accessed 05 05 2008 21 07

a regulatory framework for a policy of sustainability lessons from the neo liberal school abstract in this paper targets institutions and policy measures for describing and implementing sustainable development are evaluated in terms of their conformity with the economic framework of a market system from the viewpoint of neo liberal economic thinking as conceived by the german freiburg school of economists a general set of criteria is developed it includes issues of operationalization and legitimation of goals as well as institutional and instrumental issues on this basis general rules for designing an ecological framework guaranteeing the greatest possible degree of conformity with a market system are derived the concrete application of these rules leads to recommendations for a policy of sustainability with respect to the setting of goals the establishment of institutions as well as the use of appropriate instruments

social norms and emission tax multiple equilibria in adopting pollution abatement device the effect of social norm is addressed in an adoption game where an emission tax is used to motivate oligopolistic firms to adopt a pollution abatement device we ask if the intrinsic motivation from social norm alone can motivate firms to participate in adoption the multiple equilibria in the adoption game indicates two possibilities this intrinsic motivation may or may not enhance adoption the existing literature on equilibrium selection further suggests that the most likely outcome is that it cannot enhance adoption next by keeping the assumption of symmetry we show that if cooperation is an option for firms then the presence of two coordination effects social norm on adoption and cooperation benefits on output will result in the existence of asymmetric adoptions

optimal pollution standards and non compliance in a dynamic framework in this paper we present a stackelberg differential game to study the dynamic interaction between a polluting firm and a regulator who sets pollution limits overtime at each time the firm settles emissions taking into account the fine for non compliance with the pollution limit and balances current costs of investments in a capital stock which allows for future emission reductions we derive two main results first we show that the optimal pollution limit decreases as the capital stock increases while both emissions and the level of non compliance decrease second we find that offering fine discounts in exchange for firm s capital investment is socially desirable we numerically obtain the optimal value of such discount which crucially depends on the severity of the fine in the limiting scenario with a very large severity of the fine the optimal discount implies that no penalties are levied since the firm shows adequate adaptation progress through capital investment

the role of investment in environmental lobbying contests this paper establishes that a lobbying stage following investment decisions regarding abatement technology may imply a positive strategic effect of investment pointing to relatively more investment in pollution abatement technologies than without lobbying the intuition is that polluting firms may choose to implement more advanced abatement technology as a credible commitment device in order to lower the investment of environmentalists in the lobbying contest that will ultimately determine whether or not an emissions tax is introduced

innovation in pollution control comparisons of the various institutional arrangements for controlling pollutant emissions from individual sources effluent fees effluent control subsidies marketable permits and direct command and control regulation have usually focused on their static efficiency properties and institutional feasibility e g dales 1968 zerbe 1970 baumol and oates 1975 kneese and schultze 1975 marin 1978 mills and white 1978 spence and weitzman 1978 russell 1979 a relatively neglected area has been the study of how each arrangement influences innovation in pollution control a few studies e g kneese and schultze 1975 marin 1978 mills and white 1978 russell 1979 have casually claimed that the control methods that rely on economic incentives provide superior incentives for innovation but there have been few systematic studies of the question this paper provides a simple model of pollution control innovation by a profitmaximizing polluter who is subject to the various control methods the consequences of the methods will be explored in three major contexts first we assume that the polluter and the innovation is a small enough part of the overall pollution problem so that none of the important marginal conditions are changed by the innovation second we assume that the polluter and the innovation are important enough so that marginal conditions are changed by the innovations but that the governmental authority determining pollution control incentives or levels fails to make the appropriate adjustments third we again assume that the innovation causes marginal conditions to change but in this case the governmental authority makes the appropriate adjustments we use the term ratcheting to describe this last phenomenon in all cases we assume that the innovating polluter correctly predicts the reactions of the governmental authority and bases his innovation decisions on that prediction a profit maximizing entrepreneur would normally be expected to adopt any innovation that promised gains present discounted value to him in excess of initial

income inequality and the development of environmental technologies within rich countries a large dispersion in the capacity of generating environmental innovations appears correlated to the level of inequality previous works analyze the relationship between inequality and environmental quality in a static setting this paper builds a dynamic model more suitable to analyze technological externalities driven by the emergence of a new demand for green products under fairly general assumptions on technology and preferences we show that 1 the relationship between inequality and environmental innovation is highly non linear and crucially depends on per capita income 2 an excessive inequality harms the development of environmental technologies especially in rich countries key to our results is the fact that externalities generated by pioneer consumers of green products benefit the entire population only for relatively low income distances the empirical analysis robustly confirms our theoretical results that is whereas for rich countries inequality negatively affects the diffusion of innovations per capita income is paramount in poorer ones

linking induced technological change and environmental regulation evidence from patenting in the u s auto industry a b s t r a c t this article uses a carefully screened patent database in automobile emission control technologies and a detailed regulatory action analysis to examine firms innovation in response to u s technology forcing auto emissions standards enacted between 1970 and 1998 the study finds that under the performance based technology forcing pbtf auto emissions regulations both automakers and compo nent suppliers innovated and introduced more advanced emission control technologies for automobile applications the study also shows that stringent pbtf regulation temporarily induced domestic u s firms to become more innovative than foreign firms that operated in the local u s market during the early phase of the regulatory regime findings of this research strongly imply that government intervention in the form of technology forcing regulation can drive firms to invest in technological innovation

dynamic incentives by environmental policy instruments a survey abstract in this paper i survey and discuss recent developments on the incentives provided by environmental policy instruments for both adoption and development of advanced abatement technology a main conclusion to be drawn from the literature is that under competitive conditions market based instruments usually perform better than command and control moreover taxes may provide stronger long term incentives than tradable permits if the regulator is myopic if the government can anticipate new technology or is able to react on it optimally regulatory policies by virtue of administered prices taxes and policies by setting quantities issuing tradable permits are almost equivalent the literature also shows that under competitive conditions there is no difference between auctioning permits and grandfathering moreover timing and commitment of environmental policy is not crucial for adoption under competitive conditions commitment has positive incentive effects however if an r d sector has market power in the presence of market imperfections the ranking of the different policy instruments is ambiguous

the applicability of marginal abatement cost approach a comprehensive review abstract the marginal abatement cost mac methodology is widely used in climate change policies policy makers rely on mac to assess feasible strategies and related costs to achieve emission reduction goals this paper introduces a variety of mac methodologies aiming at solving diverse problems which utilizes various calculable logic thus producing different results and implications this study applies a mind mapping method to capture differentiation of mac methods and systematically classify mac methodologies the applicability path analysis was proposed based on principles such as stakeholder type decision making objectives cost concept strategy mode and information scope our goal is to assess the applicability of different methodologies to reduce misuse by policy makers and to serve as a guide for subsequent research which might prompt and lead to the derivation of more consequential results in future studies the results of this study suggest that the complex method is not always better than the simplified method because policy makers are required to select the appropriate method according to the type of information needed it may even be suggested that mac could be reliable by ranking relative value of options compared with baseline rather than focusing on the absolute value of individual measures

can direct regulations spur innovations in environmental technologies a study on firm level patenting this paper provides new evidence on the role of non market based command and control regulations in relation to innovations in environmental technologies while pricing is generally considered the first best policy instrument non market regulations such as technology standards and non tradable emission quotas are common when a regulator faces multiple emission types and targets heterogeneous recipients or uncertainty with regard to marginal damages knowing whether these regulations spur or hinder innovation is of great importance to environmental policy using a unique norwegian panel data set that includes information about the type and number of patent applications technology standards non tradable emission quotas and a large number of control variables for almost all large and medium sized norwegian incorporated firms we are able to conduct a comprehensive study of the effect of non market based regulations on environmental patenting unlike previous studies that are typically conducted at the industry level we are able to take firm heterogeneiry into account and thereby reduce the common problem of omitted variable bias in our analysis we empirically identify strong and significant effects on innovations from implicit regulatory costs associated with the threat that a firm will be sanctioned for violating an emission permit

timing and commitment of environmental policy adoption of new technology and repercussions on r d we investigate the interplay between environmental policy incentives to adoptnew technology and repercussions on r d we study a model where a monopolistic upstream firm engages in r d and sells advanced abatement technology to polluting downstream firms we consider four different timing and commitment regimes of environmental tax and permit policies ex post taxation or issuing permits interim commitment to a tax rate a quota of permits after observing r d success but before adoption and finally two types of ex antecommitment before r d activity one with a unique tax rate quota of permits the other one with a menu of tax rates permit quotas we study the second best tax and permit policies and rank these with respect to welfare in particular we find that commitment to a menu of tax rate dominates all other policy regimes

advanced solar r d combining economic analysis with expert elicitations to inform climate policy the relationship between r d investments and technical change is inherently uncertain in this paper we combine economics and decision analysis to incorporate the uncertainty of technical change into climate change policy analysis we present the results of an expert elicitation on the prospects for technical change in advanced solar photovoltaics we then use the results of the expert elicitations as inputs to the minicam integrated assessment model to derive probabilistic information about the impacts of r d investments on the costs of emissions abatement

changing risk premia evidence from a small open economy little is known about the differences in the relation between risk and return in large economies such as the u s compared with smaller less studied markets in this paper sweden serves as a representative for small open economies the price of risk on the swedish stock market is estimated using a conditional asset pricing model that allows for time variation in the risk four different garch m models are used in the econometric specification the estimates of the price of risk are invariably positive and significant and we conclude that there exists a time varying risk premium in the swedish stock market our results show that there are small differences in the preferences towards risk of representative investors in small and large economies

liquidity creation through banks and markets multiple insurance and limited market access abstract the paper studies the intertemporal allocation of funds through demand deposits and anonymous markets first separately and then in an integrated model it reviews some work on the role of market frictions and asset characteristics and suggests that the interplay between these two is crucial in explaining the observed coexistence of demand deposits and anonymous markets

a welfare analysis of the diamond dybvig model i show how to design a welfare improving tax system for a diamond dybvig dd related economy in addition to its relevance to the dd literature the paper constructs a nice example for a pareto improving intervention when markets are incomplete and provides a welfare analysis of the market for liquidity

intra day and inter market volatility in foreign exchange rates four foreign exchange spot rate series recorded on an hourly basis for a six month period in 1986 are examined a seasonal garch model is developed to describe the time dependent volatility apparent in the percentage nominal return of each currency hourly patterns in volatility are found to be remarkably similar across currencies and appear to be related to the opening and closing of the worlds major markets robust lm tests designed to deal with the extreme leptokurtosis in the data fails to uncover any evidence of misspecification or the presence of volatility spillover effects between the currencies or across markets

environmental regulation with technology adoption learning and strategic behavior we analyze a model of environmental regulation with learning about environmental damages and endogenous choice of emissions abatement technology by a polluting firm we compare environmental policy under discretion in which policy is updated upon learning new information versus under rules in which policy is not updated when investment in abatement technology is made prior to the resolution of uncertainty neither discretion nor rules with either taxes or standards achieve an efficient solution except in special cases when there is little uncertainty rules are superior to discretion because discretionary policy gives the firm an incentive to distort investment in order to influence future regulation however when uncertainty is large discretion is superior to rules because it allows regulation to incorporate new information taxes are superior to standards under discretion regardless of the relative slopes of marginal costs and marginal damages for the case of quadratic abatement costs and damages

pollution accumulation and firm incentives to accelerate technological change under uncertain private benefits the paper explores the relationships between the design of public incentives and the policy maker s desired timing of abandonment of a polluting technology when this requires an irreversible private investment and the firm faces uncertain appropriable benefits from the technological change two regulatory approaches are examined firstly we consider the quite common one of lowering the private investment cost through a subsidy in order to bridge the gap between the private and the policy maker s desired timing of environmental innovation secondly we consider a policy scenario where the regulator instead of simply lowering the investment s rental price also stimulates abandonment of the polluting technology by reducing through appropriate announcements the uncertainty surrounding the technological switch s private profitability we then compare the two approaches and show the latter s benefits in terms of the policy s effectiveness and or budgetary savings