nep-res New Economics Papers
on Resource Economics
Issue of 2005‒02‒20
three papers chosen by
Maximo Rossi
Universidad de la República

  1. Network Externalities: Adoption of Low Emission Technologies in the Automobile Market By Eftichios S. Sartzetakis
  2. Tradable emission permits in a federal system By Harrie A.A. Verbon; Cees A. Withagen
  3. Pollution standards, costly monitoring and fines By Arguedas,Carmen

  1. By: Eftichios S. Sartzetakis (University of Macedonia (Greece)and University College of the Cariboo)
    Abstract: This paper develops a simple model of the automobile market, in which significant network and environmental externalities are present, and examines consumers' choice of technology. There are two types of technology: one that currently dominates the market but imposes significant environmental costs, and one that is expected to be introduced and has zero environmental costs. We find that, in the absence of policy intervention, the benefits of the installed base and the price diferentials in favour of the existing technology will deter new users from adopting the clean technology. We consider diferent tax policies that will induce adoption provided it is welfare warranted. First, we analyze a tax policy on the dirty technology with the tax revenues generated being used for general purposes.Under this case, we find that the tax, to induce adoption, will be greater than the marginal environmental damage. Second, we consider the tax revenue generated from the dirty technology to be earmarked towards a future subsidy to the clean technology. In this case, the tax is found to be lower than the case where revenues are used for general purposes and more interesting is the fact that the tax can be set equal to the marginal damage. Finally, we examine the case where the government credibly commits a revenue neutral tax/subsidy policy prior to the introduction of the clean technology and we find that the tax and the subsidy expenditures required could be lower relative to the case without precommitment.
    Date: 2004
  2. By: Harrie A.A. Verbon (Tilburg University and Center); Cees A. Withagen (Tilburg University and Center; Free University Amsterdam and Tinbergen Institute)
    Abstract: A system of tradable permits in the standard setting is effective in attaining the policy objective with regard to pollution reduction at the least cost. This outcome is challenged in case of a tradable permit system in a federal state with individual states having discretionary power regarding environmental policy and where pollution is transboundary across states. This paper explores the opportunities of the central authority to influence the effectiveness of the system, under different institutional arrangements, through the initial allocation of permits
    Keywords: tradable permits, trade bans, fiscal federalism.
    JEL: H21 H23 Q00
    Date: 2004
  3. By: Arguedas,Carmen (Tilburg University, Center for Economic Research)
    Abstract: We investigate the features of optimal regulatory policies composed of pollution standards and probabilities of inspection, where fines for non-compliance depend not only on the degree of violation but alson on nongravity factors. We show that optimal policies can induce either compliance or noncompliance with the standards, the latter being more plausible when monitoring costs are large and, surprisingly, when gravity-based fines are large. Also, both tghe convexity of the sanctions and the level of the non-gravity-based penalties play a key role as to whether optimal policies induce noncompliance.
    JEL: D82 K32 K42 L51
    Date: 2005

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