Abstract
In a model where firms face a continuous choice of how much to invest in environmental innovation, we show that an ever stricter environmental policy does not always lead to ever cleaner production methods and ever lower production of polluting goods. It does so when the abatement technology is end-of-pipe. When the abatement technology is integrated however, either emission intensity or output is U-shaped in the strictness of policy. If the emission intensity is U-shaped, it will reach its lowest value at the point where the Marginal Abatement Cost curves intersect. These results hold with emission taxation (whether firms are price-takers or they interact strategically on the output market) as well as in the social optimum.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
