Incentives for innovation and adoption of new technology under emissions trading
2009 (English)Report (Other academic)
A common claim in both the public and academic debate is that a tradable emission permits scheme does not provide sufficient incentives for R&D investments. The present paper addresses R&D investments and penetration rates of new technology focusing on the specific characteristics of a tradable permits market. It is showed that a complex dependency between the emissions cap, the market price for emission permits, the price for technology once it is developed and the R&D investment decision add an additional layer to the traditional market failures associated with R&D. Even though the cap and how it is calibrated in response to the introduction of new technology is shown to be of importance both for the level of R&D investment and the technologys penetration rate, we argue that the policy makers ability to use the cap to counter market failures in the R&D stage is limited. This is due to a dynamic inconsistency problem where the policy maker is unable to credibly commit to a future policy that is more stringent than motivated by efficiency concerns given the then existing technology. Such a policy may not be stringent enough to cover the necessary R&D investments.
Place, publisher, year, edition, pages
Stockholm: Centre for Transport Studies , 2009. , 21 p.
CTS Working Paper, 2009:10
Emission, Trade, Emission control
Research subject Road: Transport, society, policy and planning, Road: Environment; Road: General works, surveys, comprehensive works, Road: Economics
IdentifiersURN: urn:nbn:se:vti:diva-707OAI: oai:DiVA.org:vti-707DiVA: diva2:669407