A part of a book
Innovation Under the Threat of Stricter Environmental Standards
Title of the book
Environmental Policy and Market Structure
Address of publication
Carraro C., Katsoulacos Y., Xepapadeas A.
Economics, Energy and Environment
This paper considers the threat of stricter regulation as a policy instrument to enhance innovation into cleaner technology. It is argued that in some contexts the government would find it optimal to regulate with positive probability but not with certainty. In those contexts the optimal policy is indeed made of regulatory threats; furthermore, we show that it is time-consistent, credible, involving little information, and immune to ex post renegotiation.
environmental regulation, innovation, réglementation environnementale, innovation
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