Diffusion and adoption of advanced emission abatement technology induced by permit trading. (17th February 2020)

• Record Type: Journal Article
• Authors: Endres, Alfred; Friehe, Tim; Rundshagen, Bianca
• Is Part Of: Journal of public economic theory. Volume 22:Number 5(2020)
• Page Start: 1313
• Page End: 1337
• Publication Date: 2020-02-17
• Subjects: Economic policy -- Periodicals; Finance, Public -- Periodicals; 338.9005
• DOI: 10.1111/jpet.12430
• Languages: English
• ISSNs: 1097-3923

Abstract

Abstract: This paper analyzes firm incentives to diffuse and adopt advanced abatement technology for three different regimes of tradeable emission permits (auctioning, benchmarking, and grandfathering). We particularly consider technical change that decreases marginal abatement costs (MACs) only at high emission levels, whereas it increases them at low firm emissions. We establish that the desirability of the different regimes of allocating permits to firms is critically influenced by how MACs are changed by technological improvements.