Jürgen Dietz, Peter Michaelis
Incentives for Innovation in Pollution Control: Emission Standards
Revisited
Abstract:
Conventional
analysis of
the economics of environmental policy usually claims that emission
taxes induce
a stronger incentive for an improvement in pollution abatement
technologies compared
to emission standards. In contrast, recent empirical studies reveal
that there
is no systematic relationship between improvements in pollution
abatement
technologies and the policy instrument chosen. The present paper tries
to
clarify this contradiction. In the first step the paper shows that the
conventional
model of innovation in pollution control under different policy regimes
is
deficient in at least two ways: It neglects policy impacts on the
firms’ output
level and it assumes a rather unrealistic type of emission standard. In
the
second step the paper presents a more elaborated model which tries to
overcome
these shortcomings. Using this model it is shown that the impact on
innovation
in pollution control caused by taxes and standards strongly depends on
the
scale of technical progress as well as on the cost structure of the
firm under
consideration such that there is no unique ranking of the two policies.
Finally,
the paper discusses the policy implications of these findings.
JEL: H23, Q55
Paper:
Paper available as pdf-file.
Beitrag Nr. 263, Volkswirtschaftliche Diskussionsreihe, Institut
für Volkswirtschaftslehre der Universität Augsburg
Contact:
Jürgen
Dietz, University of Augsburg, Department of Economics,
Universitätsstr. 16, D-86159 Augsburg, Phone +49-821-598-4062; Fax
+49-821-598-4217
E-Mail: juergen.dietz@wiwi.uni-augsburg.de
Peter
Michaelis, University of Augsburg, Department of Economics,
Universitätsstr. 16, D-86159 Augsburg, Phone +49-821-598-4057; Fax
+49-821-598-4217
E-Mail: peter.michaelis@wiwi.uni-augsburg.de
v.
K., 17.05.2004