Industrial Competitiveness and Diffusion of New Pollution Abatement Technology - a new look at the Porter-hypothesis
Year: 2004
Type: preprint
Abstract: We study the relationship between industrial competitiveness, adaption of cleaner\nproduction techniques and environmental policy. While other contributions have analyzed\nenvironmental innovations with point of departure in the polluting firm, we introduce an upstream\nmarket for new pollution abatement technology. A strong environmental policy may\nthen benefit industrial competitiveness through its effect on the price on pollution abatement.\nHowever, the incentive for a stringent policy partly disappears if there is a global market for\npollution abatement solutions, and environmental policy is set simultaneously in several\ncountries.\nIn our analysis we hope to draw attention to an often overlooked issue. The diffusion of new\npollution abatement techniques often requires a new market to develop. If policy is lax, few\nfirms enter and may charge a high mark-up to cower entry costs. On the other hand, a\nstringent environmental policy induces higher demand and allows a lower mark-up.\nConsequently, even if the polluting industry in question is export oriented, a stringent policy\nmay be welfare enhancing.
Author: Mads Greaker
Language: English
Subfield: Economics and Econometrics
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W1495532900