the impact of the german feed in tariff scheme on innovation evidence based on patent filings in renewable energy technologies abstract over the last two decades feed in tariffs have pushed the massive expansion of electricity from renewable energy sources in germany between 1991 and 1999 feed in tariffs were prescribed through the electricity feed in law the so called stromeinspeisungsgesetz seg at relatively moderate rates from 2000 onwards the seg was replaced by the renewable energy sources act the so called erneuerbare energien gesetz eeg with much higher subsidy rates the rise in subsidies to renewable power generation under the eeg came along with a substantial increase in electricity prices provoking an intense public debate on the benefits of renewable energy promotion in our regression analysis we assess one popular justification for feed in tariffs the demand side effect of induced innovation we find that the innovation impact of the german feed in tariff scheme over the last two decades supports the positive innovation hypothesis however the inducement effect of the feed in tariff scheme under the eeg is not significantly different from that of the seg given the drastic cost of the eeg we caution against the appraisal of the eeg feed in tariff scheme solely on the grounds of its impact on technological innovation

does environmental policy stringency foster innovation and productivity in oecd countries abstract in this paper we test the weak and strong versions of the porter hypothesis using data from 14 oecd countries over the period 1990 2011 our analysis makes two contributions to the literature on the topic first we use a newly released environmental policy stringency index eps provided by the oecd as an indicator for the stringency of environmental regulations which addresses the multi dimensionality of environmental regulations second as a suitable method to deal with asymmetric distributions of the dependent variables we use a panel quantile regression model which allow us to test whether or not the hypothesis holds for all quantiles of the distribution of the corresponding dependent variable the findings indicate that in the short term a more strict environmental policy is associated with an increase in the number of patent applications and in total factor productivity tfp for the highest quantiles of the distribution of patents and for all quantiles of tfp respectively moreover environmental stringency has a positive effect on research and development expenditures rd only in the lower quantiles 10 25 in the long term the eps is affecting rd patents and tfp in all quantiles and hence more stringent environmental regulations promote cleaner production processes that could help improving energy efficiency

technical change external economies and the porter hypothesis abstract michael porter introduces the idea that environmental regulations may benefit affected firms this paper derives results consistent with porter s hypothesis by employing a general equilibrium framework with a large number of agents external economies of scale in production and discrete changes in technology the model shows that endogenous technical change makes porter s hypothesis feasible however a policy that produces results consistent with porter s hypothesis is not necessarily optimal

environmental policy and international trade when governments and producers act strategically some environmentalists express concern that trade liberalization may damage the environment by giving governments incentives to relax environmental policies to give domestic producers a competitive advantage support for such concern may be given by models of imperfectly competitive trade where there may be rent shifting incentives for governments to relax environmental policies but there are also incentives for producers to act strategically e g through their investment in rd ii allowing governments to act strategically increases the incentive for producers to act strategically iii welfare is lower when both parties act strategically and iv strategic behavior by producers and governments is greater when governments use emission taxes than when they use emission standards

taxing variable cost environmental regulation as industrial policy abstract conventional wisdom has it that a country that enacts strict environmental regulations will place its firms at a competitive disadvantage this view has been challenged recently some commentators argue that stricter regulation will enhance domestic competitiveness strict regulations induce innovation we evaluate this argument in a strategic trade model in very special cases a strengthening of regulation may result in a shift of profits from foreign to domestic firms this is not a general result however environmental regulation should of course be imposed to control externalities but it is unlikely that it will serve to generate industrial advantage

the effect of clean water regulation on profitability testing the porter hypothesis previous theoretical research provides opposing arguments regarding the effect of environmental regulation on profitability this study provides empirical evidence on this debated effect by testing the strong version of the porter hypothesis we employ panel data analysis to examine the effect of water regulation as measured by permitted wastewater discharge limits on the profitability of publicly held firms operating within the chemical manufacturing industries we find that tighter water regulation meaningfully lowers profitability by reinterpreting profitability in terms of sales and costs the results demonstrate that tighter water regulation increases costs conditioned on a given level of sales

did the invisible hand need a regulatory glove to develop a green thumb some historical perspective on market incentives win win innovations and the porter hypothesis the idea that properly designed environmental regulations can improve a firm s competitiveness while simultaneously contributing to a cleaner environment through the development of so called win win innovations i e that reduce environmental damage while simultaneously increasing profits is usually credited to porter 1991 numerous studies have since attempted to assess the validity of the concept with mixed results this paper contributes to this debate by surveying a nearly forgotten body of literature written in the late nineteenth and early twentieth century that discussed the impact of market incentives on the development of valuable by products out of industrial waste based on the opinions held by several industrial chemists engineers technical journalists and economists the development of win win manufacturing practices seems to have been primarily the result of the profit motive although actual or potential legal actions based on private property rights and or government regulations occasionally triggered this process after reviewing some important historical writings on the latter issue a suggestion is made that perhaps the best way to craft well designed environmental regulations is to return to a private property rights approach to mitigating pollution problems whenever possible

some evidence on demand fluctuations and the increased stability of the post war american economy this paper investigates the implications of a sticky wage contracting model that can explain both the decline in wage and price flexibility and the increased stability of the post war american economy the reduction in the size of demand shocks in the post war period has increased agents incentives to write longer contracts though longer contracts have rendered real activity more responsive to demand shocks in the post war period the reduction in the size of these shocks has dominated the increase in the size of response to a particular shock overall real activity has become more stable in the post war period as predicted by theory

environmental policy and competitiveness the porter hypothesis and the composition of capital abstract the porter hypothesis suggests a win win situation in the sense that environmental policy improves both environment and competitiveness the suggestion received strong criticism from economists driven by the idea that if opportunities exist firms do not have to be triggered by an extra cost in this paper a model is developed which confirms this point but which also draws attention to some general mechanisms that relax the trade off considerably downsizing and modernization of firms subject to environmental policy will increase average productivity and will have positive effects on the marginal decrease of profits and environmental damage

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

clean and productive empirical evidence from the german manufacturing industry abstract in view of the controversial policy debate on green growth and corresponding stimulus packages we empirically investigate the production effects of environmental investment as well as of environmental and energy expenditures using a panel dataset of german manufacturing sectors our econometric analysis identifies a positive impact of environmental investment on production growth in contrast our estimation results cannot support the hypothesis of positive production impacts induced by environmental or energy expenditures we thus conclude that environmental regulation should in particular stimulate environmental investment in order to be compatible with the pursuit of production growth

toward a new conception of the environment competitiveness relationship accepting a fixed trade off between environmental regulation and competitiveness unnecessarily raises costs and slows down environmental progress studies finding high environmental compliance costs have traditionally focused on static cost impacts ignoring any offsetting productivity benefits from innovation they typically overestimated compliance costs neglected innovation offsets and disregarded the affected industry s initial competitiveness rather than simply adding to cost properly crafted environmental standards can trigger innovation offsets allowing companies to improve their resource productivity shifting the debate from pollution control to pollution prevention was a step forward it is now necessary to make the next step and focus on resource productivity

corporate governance environmental regulations and technological change abstract this paper investigates the relationship between environmental regulations and innovation by focusing on the automobile industry in a cross country setting we provide empirical evidence that the presence of agency problems mitigates the negative effects of environmental regulations on overall r d activity which leads to full compensation when the degree of agency problems is sufficiently high guiding our empirical analysis we provide a general model consistent with the structure of existing ownership data specifically we model ownership structure as a combination of two extreme corporate governance types on the one extreme there are profit maximizers and on the other extreme there are managers who are only concerned with their private benefits the model leads to a simple country level ownership indicator and shows that if an economy is dominated by firms with higher agency problems then pollution tax might even increase overall r d while reducing pollution according to our estimations such an outcome is possible only for out of sample values of the ownership indicator where the degree of agency problems is extremely high

measuring product diversity abstract the diversity of a set of products can be defined as a function of the bilateral distances between its elements we show how these bilateral distances can be represented by parameters in a utility function and measured from observable data

a framework to compare environmental policies 1 introduction to analyze environmental policy proposals it is important to determine the conditions under which some policies might work better than others when will a pollution tax work better than the sale of permits or some other alternative which is easier to administer or to enforce does one policy apply better to some kinds of pollutants than to others which policy has a greater chance of getting enacted this paper provides a framework to compare alternative policies for each pollutant in each context one policy may be more efficient while others better account for competing objectives like administrative efficiency political feasibility and fairness using this framework the paper will analyze and compare eight types of policies clearly no single policy instrument will work best in all cases under some circumstances command and control cac instruments might be necessary in either of two forms i emission restrictions sometimes called performance standards or ii technology restrictions that might be called design standards if emissions are difficult or impossible to measure for example then the authorities can at least enforce rules that require the proper installation of the required pollution control equipment such as a flue gas desulfurization unit scrubber on every electric power plant or a catalytic converter on every automobile in other cases that are important to identify these cac instruments can be replaced by incentive instruments such as taxes subsidies or permits as suggested by pigou 1932 the pollution problem could be addressed by i taxes on the pollution or ii subsidies to abatement a pigouvian tax applies to the pollutant itself rather than to output at a rate equal to the pollutant s marginal environmental damages med the term incentive instruments includes both the pigouvian tax and the subsidy to abatement and it includes two other policies that involve permits such as those traded by electric utilities under the clean air act amendments of 1990 those permits could be i grandfathered or handed out to existing firms in proportion to past emissions or ii sold at auction by the government a simple analytical model is used below to demonstrate conditions under which the pigouvian tax is equivalent to a government sale of permits much of the environmental economics literature finds that the use of incentives is more cost effective than cac restrictions with imperfect information the regulatory authorities may or may not know what is the cheapest form of abatement technology thus cac regulations may require technology that is more expensive than necessary with a tax or a price per unit of emissions however each firm has incentives to find and to undertake any form of abatement that is cheaper than buying a permit since only the cheapest forms of abatement are undertaken these incentive policies can minimize the total cost of achieving any given level of pollution protection so far this cost effectiveness argument does not distinguish between taxes subsidies permits that are handed out or permits sold at auction yet the handout of permits does not raise any revenue thus a new literature in environmental economics concentrates on a distinction between policies that raise revenue like a tax on pollution or the sale of permits as opposed to polices that do not raise revenue like the handout of permits or a cac restriction on emissions 2 the model below will be used to reflect on this distinction as well so far i have listed two cac policies two pigouvian solutions and two versions of a permit policy yet in some cases with well defined property rights even with pollution coase 1960 shows how the private market can still achieve economic efficiency on its own government does not need to intervene at all except perhaps to help enforce property rights through a court system

environmental regulation and technology transfers this paper analyzes the situation in which a national government introduces environmental regulations within the framework of an international duopoly with environmental regulations an environmental tax imposed by the government in the home country can induce a foreign firm with advanced abatement technology to license it to a domestic firm without this technology furthermore when the domestic firm s production technology is less efficient than that of the foreign firm the foreign firm may freely reveal its technology to the domestic firm these improvements through the voluntary transfer of technology imply that environmental regulations have positive impacts on innovation resume reglementation environnementale et transferts de technologie ce texte analyse le cas d un gouvernement national qui etablit des reglementations environnementales dans le cadre d un duopole international avec reglementations environnementales le gouvernement national impose une taxe environnementale au plan domestique qui peut induire une firme etrangere qui dispose d une technologie avancee qui reduit l impact environnemental a vendre une licence permettant d utiliser cette technologie a une firme domestique qui ne l a pas de plus quand la technologie de production de la firme domestique est moins efficace que celle de la firme etrangere la firme etrangere peut reveler sa technologie a la firme domestique ces ameliorations a travers les transferts volontaires de technologie impliquent que les reglementations environnementales ont des impacts positifs sur l innovation

environmental policy and the equilibrium rate of unemployment abstract this paper integrates environmental policy instruments with the theory of equilibrium unemployment we investigate the question of whether a low equilibrium rate of unemployment and a high quality of the environment are complementary policy goals or must be traded off it turns out that an interval exists for a tax on emissions where the two goals are indeed complementary the tax stimulates the emergence of an abatement sector which provides pollution control and vacancies for the job seekers for constrained efficiency the policy maker operates five instruments to internalize the environmental and the search externalities a tax on emissions employment subsidies and recruiting allowances for the polluting industries are sufficient to implement the first best the optimal emission tax is an increasing function of the workers bargaining strength for labor markets where workers have a strong bargaining position the optimal pollution tax may easily exceed the pigouvian tax

does the porter hypothesis explain expected future financial performance the effect of clean water regulation on chemical manufacturing firms previous research provides opposing theoretical arguments regarding the effect of environmental regulation on financial performance as one important argument the porter hypothesis claims that tighter regulation improves financial performance this study provides empirical evidence on this debated effect in particular we employ panel data analysis to examine the effect of clean water act regulation as measured by permitted wastewater discharge limits on expected future financial performance as measured by tobin s q for publicly owned firms in the chemical manufacturing industries we find that tighter permitted discharge limits lower tobin s q i e more stringent clean water act regulation undermines expected future financial performance by decomposing tobin s q into its constituent components market value and replacement costs and estimating each component separately we find that tighter permitted discharge limits lower both components with a larger impact on market value which implies that investors revise their expectations of the discounted present value of future profits in response to changes in clean water act regulation

the effect of within sector upstream and downstream energy taxes on innovation and productivity the aim of this paper is to investigate the effect of environmental regulatory stringency on innovation and productivity using a panel of 8 european countries for 13 manufacturing sectors over the years 2001 2007 this research topic falls under the heading of the porter hypothesis ph of which different versions have been tested we consider both the strong and the weak versions of the ph while also adding some peculiar features to the analysis firstly we assess the role played by environmental taxes that is an instrument rarely tested as a factor which can support the ph secondly we analyse not only the effect of environmental taxes within a given sector within sector but also the role played by environmental taxes in upstream and downstream sectors in terms of input output relationships thirdly we test these relationships also indirectly by verifying whether innovation is one of the channels through which higher sectoral productivity can be achieved by imposing tighter environmental regulations our main findings suggest that downstream stringency is the most relevant driver of innovation and productivity while within sector regulations only affect productivity but not innovation moreover the effect of regulations on productivity is mostly direct while the part of the effect mediated by induced innovations as measured by patents is relevant only for what concerns downstream regulations

why environmental management may yield no regret pollution abatement options empirical evidence supports the existence of pollution abatement possibilities at negative costs the so called no regret options we provide a microeconomic rationale for the existence of such potential at the firm level an econometric application confirms that pollution abatement cost curves with no regret options are compatible with a standard production function as stated in our theoretical model c 2008 elsevier b v all rights reserved

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

integrated environmental product innovation in the region of munich and its impact on company competitiveness abstract this paper examines the impact of environmental innovations on company competitiveness of both the environment industry and related sectors in the region of munich the focus is on the drivers of these innovations and their respective effects on innovating companies not only innovations in the area of end of pipe technologies but also the development of integrated products and production methods are examined in a regional case study approach a sample of 14 manufacturing and service companies in munich southern germany was interviewed essentially environmental innovation is driven by a mixture of factors internal and external to the firm not only regulatory pressure but also cost pressure competitive advantages technological lead and customer pressure are important drivers regulatory pushed innovations contribute to the competitive performance of sample companies in a similar way as environmental innovations which are carried out voluntarily that would yield proof for the so called porter hypothesis which assumes that environmental legislation stimulates innovation and leads to win win opportunities where simultaneously pollution is reduced and productivity increased

entry exit and diffusion with learning by doing early entry has the advantage of higher revenues per unit of output early on late entry has the benefit of learning from the experience of earlier entrants and hence lower production costs the advantages are balanced off in a continuous time perfect foresight equilibrium competition generates s shaped diffusion and staggered entry and exit a monopolist will innovate less than a competitive industry but the innovation that he does do he will do sooner copyright 1989 by american economic association

energy tax changes and competitiveness the role of adaptive capacity this paper estimates the effect of energy tax and price changes on total factor productivity tfp and net trade at the industry level using a panel of industries from european countries covering the period 1990 2003 we investigate the hypothesis that industries with high adaptive capacity measured by their relative level of labor compensation are able to mitigate the adverse effects of energy tax rises better than others we identify the pro adaptation effect by interacting wage levels a proxy for human capital with energy taxes we find that the negative marginal effect of higher energy taxes on tfp and net trade is significantly reduced for industries with stronger human capital and even turns to an overall positive effect in at least two cases up to three low wage sectors display an overall negative effect this suggests that human capital is key to adaptation to higher energy costs and climate policy in some cases making it a win win

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

strategic quality competition and the porter hypothesis abstract this paper offers new support for the porter hypothesis within the context of a quality competition framework we use a duopoly model of vertical product differentiation in which two firms simultaneously choose to produce either a high environmentally friendly quality or low standard quality variant of a good before engaging in price competition in this simple setting we show that a nash equilibrium of the game featuring the low quality good can be pareto dominated by a different strategy profile in which both firms opt in favour of the green product our analysis demonstrates that in such a case both firms stand to profit from the introduction of a rule penalizing any firm refusing to produce the environmentally friendly product we also find that consumers themselves may benefit from such regulations this is always the case when shifting from low quality to high quality production brings about a cost efficiency improvement

demand for differentiated products discrete choice models and the characteristics approach we propose a specific characteristics framework in order to construct linkages between alternative conceptual approaches to modelling product differentiation first it is shown that a demand system which satisfies the gross substitutes property imposes specific requirements on the locations of products in particular the dimension of the characteristics space must be larger than or equal to the number of products minus one we then identify a method for casting a given demand system subject to certain restrictions into our characteristics framework this is illustrated for the logit probit and linear probability models of discrete choice theory finally we find a characteristics representation of the ces representative consumer

aggregation and imperfect competition on the existence of equilibrium we present a new approach to the theory of imperfect competition and apply it to study price competition among differentiated products the central result provides general conditions under which there exists a pure strategy price equilibrium for any number of firms producing any set of products this includes products with multi dimen sional attributes in addition to the proof of existence we provide conditions for uniqueness our analysis covers location models the characteristics approach and probabilistic choice together in a unified framework to prove existence we employ aggregation theorems due to prekopa 1971 and borell 1975 our companion paper caplin and nalebuff 1991 introduces these theorems and develops the application to super majority voting rules we present a new approach to the theory of imperfect competition and apply it to study price competition among differentiated products the central result is that there exists a pure strategy price equilibrium for any number of firms producing any set of products in addition to the proof of existence we provide conditions for uniqueness our model both unites diverse strands of the earlier literature and opens up uncharted areas for future analysis in particular we expand the traditional one dimensional framework to allow for multi dimen sional product differentiation our approach involves twin restrictions on consumer preferences one on individuals preferences the other on the distribution of preferences across society these are generalizations of the restrictions supporting 64 majority rule presented in caplin and nalebuff 1988 to prove existence we apply a new technique of aggregation this technique is valuable in a variety of other problems in the companion paper we use the aggregation result to generalize our earlier work on 64 majority rule and to characterize the relationship between the distribution of human capital and the distribution of income caplin and nalebuff 1991 there are additional applications in statistics and in search theory we begin with a brief review of the early literature on imperfect competition describing in more detail the existence problem and previous solutions section 3 presents our twin assumptions and shows that they cover many standard cases in section 4 we introduce the aggregation theorem and use it in the analysis of demand functions the proof of existence of equilibrium is in section

environmental innovations and firm profitability unmasking the porter hypothesis we examine impacts of different types of environmental innovations on firm profits following porter s sci am 264 4 168 1991 hypothesis that environmental regulation can improve firms competitiveness we distinguish between regulation induced and voluntary environmental innovations we find that innovations which do not improve firms resource efficiency do not provide positive returns to profitability however innovations that increase a firm s resource efficiency in terms of material or energy consumption per unit of output have a positive impact on profitability this positive result holds for both regulation induced and voluntary innovations although the effect is greater for regulation driven innovation we conclude that the porter hypothesis does not hold in general for its strong version but depends on the type of environmental innovation our findings rest on firm level data from the german part of the community innovation survey 2008 cis 2008