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Does more stringent environmental regulation induce or reduce technology adoption? When the rate of technology adoption is inverted u-shaped

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  • Perino, Grischa
  • Requate, Till

Abstract

We show that for a broad class of technologies the relationship between policy stringency and the rate of technology adoption is inverted U-shaped. This happens when the marginal abatement cost (MAC) curves of conventional and new technologies intersect, which invariably occurs when emissions are proportional to output and technological progress reduces emissions per output. This outcome does not result from policy failure. On the contrary, in social optimum, the relationship between the slope of the marginal damage curve and the rate of technology adoption is also inverted U-shaped. Under more general conditions, these curves can look even more complicated (e.g. such as inverted W-shaped).

Suggested Citation

  • Perino, Grischa & Requate, Till, 2012. "Does more stringent environmental regulation induce or reduce technology adoption? When the rate of technology adoption is inverted u-shaped," Economics Working Papers 2012-05, Christian-Albrechts-University of Kiel, Department of Economics.
    • Handle: RePEc:zbw:cauewp:201205
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    More about this item

    Keywords

    induced diffusion; environmental policy;

    JEL classification:

    • Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation
    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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