Hostname: page-component-74656f9884-54qdv Total loading time: 0 Render date: 2026-11-10T12:09:13.192Z Has data issue: false hasContentIssue false
  • English
  • Français

ABATEMENT TECHNOLOGY ADOPTION UNDER UNCERTAINTY

Published online by Cambridge University Press:  15 September 2009

Aude Pommeret  and
Katheline Schubert
Aude Pommeret*
Affiliation:
IREGE-Université de Savoie and HEC Lausanne
Katheline Schubert
Affiliation:
University Paris 1 Panthéon–Sorbonne and Paris School of Economics
*
Address correspondence to: Aude Pommeret, IMUS, Université de Savoie, Chemin de Bellevue, 74940 Annecy-le-Vieux, France; e-mail: aude.pommeret@univ-savoie.fr.
Rights & Permissions [Opens in a new window]

Abstract

Core share and HTML view are not available for this content. However, as you have access to this content, a full PDF is available via the 'Save PDF' action button.

New technology has been credited with solving environmental problems by mitigating the effects of pollutants. We construct a general equilibrium model in which abatement technology is a real option and pollution's (negative) amenity value alters both risk aversion and the intertemporal elasticity of substitution. We derive the tax scheme such that in a decentralized economy agents adopt the abatement technology at the time that is socially optimal. We show that the higher the greenness of preferences, the earlier the adoption and the higher the optimal tax rate. We also obtain that adoption is fostered by uncertainty if the effective intertemporal elasticity of substitution is large enough, but is not affected by uncertainty if this elasticity is low. Moreover, the optimal tax rate, which only exists if the effective intertemporal elasticity of substitution is high, is an increasing function of uncertainty.

Keywords

Abatement TechnologyUncertaintyOptimal TimingPollution Tax

Information

Type
Articles
Information
Macroeconomic Dynamics , Volume 13 , Issue 4 , September 2009 , pp. 493 - 522
Copyright
Copyright © Cambridge University Press 2009

References

REFERENCES

Abel, Abel and Eberly, Janice (2002) Q for the Long Run. Unpublished manuscript, University of Pennsylvania.Google Scholar
Abel, Abel and Eberly, Janice (2004) Investment, Valuation and Growth Options. Unpublished manuscript, University of Pennsylvania.Google Scholar
Boucekkine, Raouf, Saglam, Cagri, and Vallée, Thomas (2004) Technology adoption under embodiment: A two-stage optimal control approach. Macroeconomic Dynamics 8, 250–271.CrossRefGoogle Scholar
Cunha-E-Sa, Maria A. and Reis, Ana B. (2007) The optimal timing of adoption of a green technology. Environmental and Resource Economics 36, 35–55.CrossRefGoogle Scholar
Galor, Oded and Tsiddon, Daniel (1997) Technological progress, mobility and economic growth. American Economic Review 87, 363–382.Google Scholar
Gray, Wayne and Shadbegian, Ronald (1998) Environmental regulation, investment timing and technology choice. Journal of Industrial Economics 46 (2), 235–256.CrossRefGoogle Scholar
Grenadier, Steven and Weiss, Allen (1997) Investment in technological innovations: An option pricing approach. Journal of Financial Economics 44, 397–416.CrossRefGoogle Scholar
Hugonnier, Julien, Morellec, Erwan, and Sundaresan, Suresh (2005) Irreversible Investment in General Equilibrium. Working paper FR 05-10, Simon School of Business.Google Scholar
Hugonnier, Julien, Pelgrin, Florian, and Pommeret, Aude (2008) Technology Adoption under Uncertainty in General Equilibrium. Working paper, University of Lausanne.Google Scholar
Jaffe, Adam, and Stavins, Robert (1995) Dynamic incentives of environmental regulation. Journal of Environmental Economics and Management 29, 43–63.CrossRefGoogle Scholar
Jovanovic, Boyan (1997) Learning and growth. In Kreps, D. and Wallis, K. (eds.), Advances in Economics 2, pp. 318–339. London: Cambridge University Press.Google Scholar
Kerr, Suzi and Newell, Richard (2003) Policy-induced technology adoption: Evidence from the U.S. lead phasedown. Journal of Industrial Economics 51 (3), 317–343.CrossRefGoogle Scholar
Khan, Aubhik and Ravikumar, B. (2002) Costly technology adoption and capital accumulation. Review of Economic Dynamics 5, 489–502.CrossRefGoogle Scholar
Kocherlakota, Narayana (1990) On the “discount” factor in growth economies. Journal of Monetary Economics 25 (1), 43–47.CrossRefGoogle Scholar
Merton, Robert C. (1969) Lifetime portfolio selection under uncertainty: The continuous-time case. Review of Economics and Statistics 51, 247–257.CrossRefGoogle Scholar
Michel, Philippe and Rotillon, Gilles (1995) Disutility of pollution and endogenous growth. Environmental and Resource Economics 6, 279–300.CrossRefGoogle Scholar
Pindyck, Robert (2000) Irreversibilities and the timing of environmental policy. Environmental and Resource Economics 22, 233–259.Google Scholar
Popp, David (2001) Pollution Control Innovations and the Clean Air Act of 1990. NBER working paper N8593.CrossRefGoogle Scholar
Portney, Paul and Weyant, John (1999) Discounting and Intergenerational Equity. Washington, DC: Resources for the Future.Google Scholar
Roche, Hervé (2003) Optimal Scrapping and Technology Adoption under Uncertainty. Unpublished manuscript, Instituto Tecnologico Autonomo de Mexico.Google Scholar
Romer, Paul (1986) Increasing returns and long run growth. Journal of Political Economy 98, 71–102.CrossRefGoogle Scholar
Smith, William T. (1996) Feasibility and transversality conditions for models of portfolio choice with non-expected utility in continuous time. Economics Letters 53, 123–131.Google Scholar
Smith, William T. and Son, Young S. (2005) Can the desire to conserve our natural resources be self-defeating? Journal of Environmental Economics and Management 49, 52–67.CrossRefGoogle Scholar
Turnovsky, Stephen J. (2000) Methods of Macroeconomic Dynamics. Cambridge, MA: MIT Press.Google Scholar
Turnovsky, Stephen J. and Smith, William T. (2006) Equilibrium consumption and precautionary savings in a stochastically growing economy. Journal of Economic Dynamics and Control 30, 243–278.CrossRefGoogle Scholar
Weil, Philippe (1990) Nonexpected utility in macroeconomics. Quarterly Journal of Economics 105, 27–42.CrossRefGoogle Scholar