Environmental Economics and Policy Studies

, Volume 20, Issue 1, pp 89–108 | Cite as

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

  • Soo Keong Yong
  • Stuart McDonald
Research Article


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.


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

JEL Classification

D21 H23 L51 Q55 



The authors thank Joanna Poyago-Theotoky and the seminar participants at the Econometrics Society Australasian Meetings for their helpful comments and suggestions. Funding support from the Global Change Institute and the University of Queensland Early Career Researcher Grant is gratefully acknowledged.


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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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