A tale of two market failures: Technology and environmental policy
Market failures associated with environmental pollution interact with market failures associated with the innovation and diffusion of new technologies. These combined market failures provide a strong rationale for a portfolio of public policies that foster emissions reduction as well as the development and adoption of environmentally beneficial technology. Both theory and empirical evidence suggest that the rate and direction of technological advance is influenced by market and regulatory incentives, and can be cost-effectively harnessed through the use of economic-incentive based policy. In the presence of weak or nonexistent environmental policies, investments in the development and diffusion of new environmentally beneficial technologies are very likely to be less than would be socially desirable. Positive knowledge and adoption spillovers and information problems can further weaken innovation incentives. While environmental technology policy is fraught with difficulties, a long-term view suggests a strategy of experimenting with policy approaches and systematically evaluating their success. © 2005 Elsevier B.V. All rights reserved.
Duke Scholars
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Related Subject Headings
- Agricultural Economics & Policy
- 3899 Other economics
- 3801 Applied economics
- 3103 Ecology
- 1499 Other Economics
- 1402 Applied Economics
- 0502 Environmental Science and Management
Citation
Published In
DOI
ISSN
Publication Date
Volume
Issue
Start / End Page
Related Subject Headings
- Agricultural Economics & Policy
- 3899 Other economics
- 3801 Applied economics
- 3103 Ecology
- 1499 Other Economics
- 1402 Applied Economics
- 0502 Environmental Science and Management