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Diffusion and adoption of advanced emission abatement technology induced by permit trading
Author(s) -
Endres Alfred,
Friehe Tim,
Rundshagen Bianca
Publication year - 2020
Publication title -
journal of public economic theory
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.809
H-Index - 32
eISSN - 1467-9779
pISSN - 1097-3923
DOI - 10.1111/jpet.12430
Subject(s) - incentive , economics , benchmarking , diffusion , technological change , emissions trading , marginal abatement cost , microeconomics , industrial organization , natural resource economics , greenhouse gas , macroeconomics , ecology , thermodynamics , physics , management , biology
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.