On reducing the windfall profits in environmental subsidy programs

Investment subsidies are widely used to induce adoption of new technologies that can lower the (marginal) cost of reducing emissions. To economize on these subsidies, governments would like to distinguish between firms that need to receive a subsidy to adopt a new technology, and firms that would adopt that technology even without subsidies. We show that policies consisting of a menu of emission taxes and investment subsidies can potentially induce firms to self-select.

[1]  D. Bromley.  Handbook of environmental economics , 1995 .

[2]  T. Requate.  Incentives to innovate under emission taxes and tradeable permits , 1998 .

[3]  F. Wirl.  Conservation Incentives for Consumers , 1999 .

[4]  Daniel F. Spulber.  Optimal environmental regulation under asymmetric information , 1988 .

[5]  Madhu Khanna,et al.  Non-mandatory Approaches to Environmental Protection , 2002 .

[6]  Till Requate,et al.  Environmental policy incentives to adopt advanced abatement technology:: Will the true ranking please stand up? , 2003 .

[7]  Paul L. Joskow,et al.  What Does a Negawatt Really Cost? Evidence from Utility Conservation Programs , 1992 .

[8]  C. Antonelli.  The Economics of Innovation, New Technologies and Structural Change , 2002 .

[9]  G. Sheriff.  Optimal environmental regulation of politically influential sectors with asymmetric information , 2008 .

[10]  Stephen H. Schneider,et al.  Achieving low-cost emissions targets , 1997, Nature.

[11]  Suzi Kerr,et al.  Policy-Induced Technology Adoption: Evidence from the U.S. Lead Phasedown , 2001 .

[12]  Franz Wirl,et al.  Lessons from Ltility Conservation Programs , 2000 .

[13]  Maryann Wolverton,et al.  The Case for a Two-Part Instrument: Presumptive Tax and Environmental Subsidy , 1997 .

[14]  Allen S. Bellas,et al.  Empirical evidence of advances in scrubber technology , 1998 .

[15]  Jean Tirole,et al.  Pollution Permits and Environmental Innovation , 1996 .

[16]  Kathleen Segerson,et al.  Assessing Voluntary Programs to Improve Environmental Quality , 2002 .

[17]  R. Stavins,et al.  Experience with Market-Based Environmental Policy Instruments , 2002 .

[18]  E. Maskin,et al.  On Imperfect Information and Optimal Pollution Control , 1980 .

[19]  Chulho Jung,et al.  Incentives for Advanced Pollution Abatement Technology at the Industry Level: An Evaluation of Policy Alternatives , 1996 .

[20]  Wallace E. Oates,et al.  The theory of environmental policy , 1976 .

[21]  J. Stranlund.  Public Technological Aid to Support Compliance to Environmental Standards , 1997 .

[22]  David A. Malueg.  Emission credit trading and the incentive to adopt new pollution abatement technology , 1989 .

[23]  A Second-Best Analysis of Environmental Subsidies , 1998 .

[24]  Per G. Fredriksson.  Environmental policy choice: Pollution abatement subsidies , 1998 .

[25]  Scott Milliman,et al.  Firm incentives to promote technological change in pollution control: Reply , 1992 .

[26]  M. Porter,et al.  Toward a New Conception of the Environment-Competitiveness Relationship , 1995 .

[27]  Tracy R. Lewis,et al.  Protecting the Environment When Costs and Benefits are Privately Known , 1996 .

[28]  Magda Lovei,et al.  Phasing Out Lead from Gasoline: Worldwide Experiences and Policy Implications , 1997 .

[29]  Eric Malm.  An Actions-Based Estimate of the Free Rider Fraction in Electric Utility DSM Programs , 1996 .

[30]  Michael Wolfe,et al.  J+ = J , 1994, ACM SIGPLAN Notices.

[31]  G. Ruggieri.  The marginal cost of public funds in closed and small open economies , 2005 .

[32]  Ekundayo Shittu,et al.  Firm Incentives to Promote Technological Change in Pollution Control : Comment , 2004 .

[33]  J. Laffont,et al.  Pollution Permits and Compliance Strategies , 1996 .

[34]  T. Requate,et al.  Pollution-reducing and resource-saving technological progress , 2007 .

[35]  A. Xepapadeas.  Economic Policy for the Environment and Natural Resources , 1996 .

[36]  J. Bergh.  Handbook of Environmental and Resource Economics , 1999 .

[37]  Adam B. Jaffe,et al.  Dynamic Incentives of Environmental Regulations: The Effects of Alternative Policy Instruments on Te , 1995 .

[38]  T. Requate.  Incentives to adopt new technologies under different pollution-control policies , 1995 .

[39]  G. Jenkins,et al.  Fiscal Policies To Control Pollution: International Experience , 1992 .

[40]  A. Jaffe,et al.  Environmental Policy and Technological Change , 2002 .

[41]  Martin P. Loeb,et al.  A Decentralized Method for Utility Regulation , 1979, The Journal of Law and Economics.

[42]  Franz Wirl,et al.  Analysis of United States' Utility Conservation Programs , 1998 .

[43]  J. Bergh,et al.  Explaining instrument choice in environmental policies. , 2002 .

[44]  Toke S. Aidt.  Political internalization of economic externalities and environmental policy , 1998 .

[45]  S. Smith,et al.  The distributional consequences of environmental taxes , 1990 .

[46]  Dallas Burtraw,et al.  SO2 allowance trading: How do expectations and experience measure up? , 1997 .

[47]  Jae-Cheol Kim,et al.  An optimal tax/subsidy for output and pollution control under asymmetric information in oligopoly markets , 1993 .

[48]  R. A. de Mooij,et al.  The double dividend of an environmental tax reform. , 1999 .

[49]  B. Babcock,et al.  Contract Design for the Purchase of Environmental Goods from Agriculture , 1996 .

[50]  Till Requate,et al.  Dynamic incentives by environmental policy instruments—a survey , 2005 .

[51]  Wallace E. Oates,et al.  Tightening Environmental Standards: The Benefit-Cost or the No-Cost Paradigm? , 1995 .

[52]  Elise S. Brezis,et al.  Leapfrogging: A Theory of Cycles in National Technological Leadership , 1991 .