Abstract
In a differential game between two symmetric firms, provided with a clean and a dirtyproduction activity, it is analyzed how investment and emissions are affected by environmentalregulation. If both firms face the same environmental policy, a stricter policy reduceslong‐run investment in the dirty technology, while the effect on the clean one is ambiguous.Long‐run emissions of each firm, and consequently total emissions, decrease. This resultneed not necessarily hold if both firms face different policy instruments: Each firm's investmentlevels, and consequently also its emissions, increase when its competitor faces a stricterenvironmental policy.
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Stimming, M. Capital accumulation subject to pollution control:Open‐loop versus feedback investment strategies. Annals of Operations Research 88, 309–336 (1999). https://doi.org/10.1023/A:1018994716675
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DOI: https://doi.org/10.1023/A:1018994716675