Environmental regulations in private and mixed duopolies: Taxes on emissions versus green R&D subsidies |
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Authors: | Sang-Ho Lee Chul-Hi Park |
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Institution: | Department of Economics, Chonnam National University, 77, Yongbong-ro, Bukgu, Gwangju, Republic of Korea |
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Abstract: | In this article, we compare two kinds of environmental regulations—emissions taxes and green R&D subsidies—in private and mixed-duopoly markets in the presence of R&D spillovers. We show that a green R&D subsidy is better (worse) than an emissions tax when the green R&D is efficient (inefficient), irrespective of R&D spillovers, whereas the existence of a publicly owned firm encourages the government to adopt a subsidy policy. We also show that the optimal policy choice depends on R&D efficiency and spillovers. In particular, when green R&D is inefficient and the spillover rate is low (high), the government should choose an emissions tax and (not) privatize the state-owned firm. When green R&D is efficient, however, an R&D subsidy is better, but a privatization policy is not desirable for society, irrespective of spillovers. |
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Keywords: | Emissions tax Green R&D subsidy Privatization policy R&D spillovers |
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