Emissions tax and second-mover advantage in clean technology R&D

Research Article
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Abstract

This paper shows that under an emissions tax regime where firms have heterogenous capabilities in clean technology R&D, firms can acquire technology developed by rival firms at a lower cost than developing the technology in-house. In anticipation of such second-mover advantage in R&D, this creates an investment disincentive for technological innovators and resulted in lower social welfare relative to the case where firms’ technological competencies are homogenous and knowledge spillovers are equally shared. To resolve, the government can award a targeted subsidy, instead of a standard uniform subsidy, solely to the innovator to seed research.

Keywords

Clean technology R&D Emissions taxes One-way R&D spillover Second-mover advantage Targeted subsidy 

JEL Classification

D21 H23 L51 Q55 

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Copyright information

© Society for Environmental Economics and Policy Studies and Springer Japan 2017

Authors and Affiliations

  1. 1.International Business School SuzhouXi’an Jiaotong-Liverpool UniversitySuzhouChina
  2. 2.Hanqing Advanced Institute of Economics and FinanceRenmin University of ChinaHaidianChina

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