Incentives for Environmental R&D
10:00 - 11:00
Since governments influence the demand for a new abatement technology through their environmental policy, they may be able to expropriate innovations in new abatement technology ex post. Recent contributions in the environmental R&D literature seem to confirm this conjecture, and suggest that incentives for environmental R&D may be systematically lower than the incentives for market goods R&D. In this paper we compare the incentives for environmental R&D with the incentives for market goods R&D in a more general model of private R&D. We find that the relationship might be the opposite: When the innovator is able to commit to a licence fee before environmental policy is resolved, incentives are always higher for environmental R&D than for market goods R&D. When the government sets its policy before or simultaneously with the innovator’s choice of licence fee, incentives for environmental R&D may be higher or lower than for market goods R&D.