TY - JOUR
T1 - Instrument choice for environmental protection when technological innovation is endogenous
AU - Fischer, Carolyn
AU - Parry, Ian W.H.
AU - Pizer, William A.
PY - 2003/5
Y1 - 2003/5
N2 - This paper compares, qualitatively and quantitatively, the welfare effects of emissions taxes, auctioned emissions permits, and free (grandfathered) permits, when technological innovation is endogenous. We find that there is no unambiguous case for preferring any of these policy instruments. The relative welfare ranking of instruments depends on the costs of innovation, the extent to which innovations can be imitated, the slope and level of the marginal environmental benefit function, and the number of polluting firms. We illustrate the types of situations when there can be significant welfare discrepancies between the policies and when there are not.
AB - This paper compares, qualitatively and quantitatively, the welfare effects of emissions taxes, auctioned emissions permits, and free (grandfathered) permits, when technological innovation is endogenous. We find that there is no unambiguous case for preferring any of these policy instruments. The relative welfare ranking of instruments depends on the costs of innovation, the extent to which innovations can be imitated, the slope and level of the marginal environmental benefit function, and the number of polluting firms. We illustrate the types of situations when there can be significant welfare discrepancies between the policies and when there are not.
KW - Environmental policies
KW - Externalities
KW - Technological innovation
KW - Welfare impacts
UR - http://www.scopus.com/inward/record.url?scp=0037994195&partnerID=8YFLogxK
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U2 - 10.1016/S0095-0696(03)00002-0
DO - 10.1016/S0095-0696(03)00002-0
M3 - Review article
AN - SCOPUS:0037994195
SN - 0095-0696
VL - 45
SP - 523
EP - 545
JO - Journal of Environmental Economics and Management
JF - Journal of Environmental Economics and Management
IS - 3
ER -