Quota markets and technological change

Lechthaler-Felber, Giulia and Krysiak, Frank C.. (2017) Quota markets and technological change. Journal of the Association of Environmental and Resource Economists, 4 (4). pp. 1199-1228.

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Official URL: https://edoc.unibas.ch/59206/

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Quota or permit markets have become an important tool for climate and energy policy, as they not only promise allocative efficiency but also provide a market-based selection of the best new technological options. We analyze their effect on technological change in a case where several technologies could be developed and where R&D firms are granted patents with a finite lifetime. We show that R&D incentives are not only too low, as is well known, but incentives are also distorted across technologies, which is a new result. Compared to the social optimum, the best technology is developed in too few cases, whereas a less promising technology might be developed too often. This distortion is difficult to correct, as information about new technologies is usually missing. However, we show that combining a quota market with a simple tax-subsidy scheme can correct some of these distortions, even if the regulator has no information regarding the properties of new technologies.
Faculties and Departments:06 Faculty of Business and Economics > Departement Wirtschaftswissenschaften > Professuren Wirtschaftswissenschaften > Umweltökonomie (Krysiak)
UniBasel Contributors:Krysiak, Frank Christian and Lechthaler-Felber, Giulia
Item Type:Article, refereed
Article Subtype:Research Article
Publisher:University of Chicago Press
Note:Publication type according to Uni Basel Research Database: Journal article
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Last Modified:14 Jun 2018 09:49
Deposited On:14 Jun 2018 09:49

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