Incentives for environmental R&D

Abstract:

Since governments ináuence the demand for a new abatement technology through their environmental policy, they may be able to expropriate innovations in new abatement technology ex post. Recent contributions in the environmental R&D literature seem to conÖrm this conjecture, and suggest that incentives for environmental R&D may be systematically lower than the incentives for market goods R&D. In this paper we compare the incentives for environmental R&D with the incentives for market goods R&D in a more general model of private R&D. We Önd that the relationship might be the opposite: When the innovator is able to commit to a licence fee before environmental policy is resolved, incentives are always higher for environmental R&D than for market goods R&D. When the government sets its policy before or simultaneously with the innovatorís choice of licence fee, incentives for environmental R&D may be higher or lower than for market goods R&D.

Published June 13, 2017 2:37 PM - Last modified July 27, 2017 7:44 AM