Abatement Innovation in a Cournot Oligopoly: Emission versus Output Tax Incentives

Arbeitspapier

This study compares energy and emission taxes used to control pollution and provide incentives for the adoption of an advanced abatement technology in a Cournot oligopoly. We examine multistage games where the government may intervene in order to maximize social welfare by setting an environmental tax rate. When the government intervenes, it levies either an energy tax or an emission tax. We show that the effectiveness of either type of tax depends on the shape of the multiproduct technology. In the absence of economies of scope in the production of energy and abatement, the energy tax reduces pollution but is ineffective in promoting technological change. The emission tax reduces pollution and is effective in promoting technological change for sufficiently small fixed costs of adoption. In the presence of economies of scope, firms may adopt the efficient technology even in the absence of taxation. When taxation is necessary for innovation, both types of taxes are effective. However, the energy tax outperforms the emission tax in terms of innovation incentives.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 6094

Classification and Topics

• Classification: Wirtschaft ; Firm Behavior: Theory ; Externalities ; Positive Analysis of Policy Formulation and Implementation ; Oligopoly and Other Imperfect Markets ; Taxation and Subsidies: Externalities; Redistributive Effects; Environmental Taxes and Subsidies ; Technological Change: Choices and Consequences; Diffusion Processes
• Subject: externalities ; output taxes ; emission taxes ; technology adoption ; Cournot duopoly

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Aoyama, Naoto ; Silva, Emilson C.D.
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2016

Further information

• Handle: http://hdl.handle.net/10419/147348
• Last update: 10.03.2025, 11:41 AM CET