Three Essays on Environmental Economics
Creators: Asrafuzzaman,.
Publisher: name: University of Alberta Library
Year: 2024

<p>In the era of globalization, countries are adopting different environmental policies<br>
to mitigate the adverse impact of climate change. A better understanding of how<br>
these policies shape firms’ decisions and impact innovation and the environment<br>
will help policymakers make informed decisions. The thesis aims to study firms’<br>
decisions regarding FDI and exports as countries introduce emission taxes and the<br>
link between innovation, environmental policy, and emissions.<br>
The first chapter theoretically studies the firms’ choice between FDI and export<br>
in a model with two countries, where each country has a single firm producing a<br>
polluting good that is subject to a per-unit emission tax. We consider a three-stage<br>
game theoretic model with both ex ante and ex post emission tax. In the case of ex<br>
ante emission tax, the government sets an emission tax, then firms decide between<br>
export and FDI and finally, firms choose their production level. In the ex-post case,<br>
firms choose between FDI and export first, and then the government decides its<br>
emission tax level, followed by the firm’s production decision.<br>
In the first case, when taxes are determined in the initial stage of the game, if<br>
the fixed cost of FDI is sufficiently high, both firms opt for exporting. However,<br>
if the fixed cost of FDI is sufficiently low, firms choose both FDI and exporting.<br>
For intermediate fixed costs, the decision between FDI and exporting depends on<br>
the level of emission taxes and tariffs. In the second case, with ex post emission<br>
taxes, anticipating that countries will set higher emission taxes if both firms engage<br>
in FDI, only one-way FDI from either country occurs in equilibrium.<br>
The rest of the thesis examines the relationship between innovation, environmental<br>
stringency, and emissions. In doing so, the second chapter provides a comprehensive<br>
review of the recent literature that uses patent data with a specific emphasis<br>
on recent trends. This chapter also introduces the concepts and datasets used in<br>
the following two empirical chapters that use patent data, particularly green patent<br>
data, as well as new measures of environmental stringency. Furthermore, the second<br>
chapter also explores recent trends in green patent applications and environmental<br>
stringency.<br>
The third and fourth chapters attempt to answer empirical questions using concepts<br>
introduced in the second chapter, using patent data from PATSTAT. In the<br>
third chapter, we investigate whether environmental policy stringency induces green<br>
innovation in OECD countries, the weak version of the Porter hypothesis. We use<br>
green patents to proxy innovation, while the newly introduced environmental stringency<br>
index proxies environmental stringency.<br>
Some of the main empirical findings are as follows. First, we do not find evidence<br>
of the weak version of the Porter hypothesis. Rather, our results suggest<br>
the presence of the technology lock-in hypothesis. Second, we find that cumulative<br>
knowledge of green technology significantly increases the likelihood of having more<br>
green innovation. This is consistent with the path dependence of green innovation<br>
and the importance of knowledge accumulation for future innovation.<br>
The fourth chapter studies whether green patents help reduce carbon dioxide<br>
(CO2) and other Greenhouse Gas (GHG) emissions. The main findings show that<br>
increasing the number of green patents is not associated with a reduction in CO2<br>
emissions. This could be due to the rebound effect, which is discussed in energy economics.<br>
The rebound effect occurs when the savings from improved energy efficiency<br>
are offset by changes in an individual’s behaviour.</p>