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Optimal Environmental Taxation With Pre-Commitment And Green R&D, Stuart Mcdonald
Optimal Environmental Taxation With Pre-Commitment And Green R&D, Stuart Mcdonald
Stuart McDonald
Two approaches for modelling investment in R\&D have been developed by d'Aspremont and Jacquemin (AJ, 1988) and Kamien, Muller and Zang (KMZ, 1992), when there are spillovers associated with R\&D effort. This paper examines how these two approaches predict investment in green technology, when environmental policy takes the form of an optimal emission tax. The results show that the two models are equivalent when there are no R\&D spillovers; but when R\&D spillovers are present, significant differences in their predictions are observed. Specifically, the KMZ model predicts higher emission tax rates, higher level of R\&D expenditures and higher levels of …