Autori
D'Amato, Alessio
Boffa, Federico
Clò, Stefano

Titolo
Environmental policy and incentives to adopt abatement technologies under endogenous uncertainty
Periodico
Ministero dell'Economia e delle Finanze. Dipartimento del Tesoro. Working paper
Anno: 2013 - Volume: 04 - Fascicolo: 5 - Pagina iniziale: 1 - Pagina finale: 27

We compare a carbon tax and a cap and trade mechanism in their propensity to induce carbon-reducing technological adoption, when investments are undertaken under uncertainty. In our setting, risk-neutral firms affect the variance and the correlation of the shocks they are exposed to through their technological choice, making uncertainty endogenous. We find that uncertainty associated with a given technology always impacts expected profits under a carbon tax, while under a cap and trade this is the case only as long as the shocks are not correlated across the firms; if,instead, shocks are perfectly correlated, uncertainty has no impact on profits. As a result, we show that, while under a carbon tax, initially symmetric firms tend to have symmetric strategies in equilibrium (either of adoption, or non adoption), a cap and trade system might also induce asymmetric adoption. Finally, we discuss several policy applications of our work, including an analysis of the effects of combining feed-in tariffs with carbon tax or cap and trade.



SICI: 1972-411X(2013)04:5<1:EPAITA>2.0.ZU;2-
Testo completo: http://www.dt.tesoro.it/export/sites/sitodt/modules/documenti_it/analisi_progammazione/working_papers/WP_N_5_-_2013.pdf

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