A Study On Incentive Policy In Emission Abatement R&D

Because of global environmental pollution and warming climate, it is urgently significant to encourage and promote innovation in abatement R&D. To make and employ incentive policy with environment policy is one of main measures to promote technology and abate emissions for government. There are wide research on incentive technology policies in the area of product innovation and process innovation represented as cost reduction, in nearly years some overseas scholar had concerns on its use in environmental technology innovation, but there are less theoretical research works conducted by Chinese scholars. Some perspectives for incentive policy are concerned in those literatures, but from the view of current development of emission abatement, it is necessary to forward the research on real use of policy in a view as a whole system. By the dissertation, it is expected to theoretically supplement and rich the employment of incentive policies in environmental technology innovation, and to provide some valuable reference and suggestion for the employment of policies and the development of emission abatement in china.The dissertation is based on the research related incentive technology policy for R&D in Industry Organization Theory. From the view of government, three ways of emploment for stimulating emission abatement R&D will be discussed: subsidization, cooperation and using both (in short, combination). A model is built based on models of D'Aspremont et al., to analyze the performance of incentive policy on emission abatement R&D, with exogenous emission tax and spillovers. By the model the equilibrium outputs, R&D level, profits and social welfare are computed under each policy for comparison, and some important problems are discussed that whether one policy will be effectively employed as well as how to decide the best incentive policy.The main research works and conclusion of this dissertation can be summarized as below:â‘ on the baisis of models of D'Aspremont et al., with exogenous emission tax, to build the decision model for the base case of emission abatement R&D that is without any incentive policy employed, which provide the basis for analyzing each policy and their difference. By the analysis on the model it is found that spillovers have no effect on best R&D level and the best product outputs but the profit and the social welfare increase to spillovers. The best R&D level increases to emission tax. But for profit and social welfare, there are two critical value of tax for them, if below the corresponding critical value, profit increases to tax while social welfare decreases, if beyond the corresponding critical value, profit decreases to tax while social welfare increases.â‘¡on the basis of model for the case without any incentive technology policy, to build the emission abatement R&D decision models for the policy cases: subsidization, cooperation and combination. To compute and compare the merits of different policies'to recognize their performances, and discuss the condition for the combination to be used effectively in consideration of the reaction of firms'behavior to the combination. It is found that in subsidization the best subsidy rate decreases to emission tax, even to be negative, which means subsidization has functions of promoting or restraining R&D level. But the policy of cooperation plays a driving role in R&D level. The policy of combination performs better in social welfare than each individual incentive policy. Which policy outputs more R&D level depends on the spillovers rate or emission tax rate. As for subsidization and cooperation, which outputs more social welfare depends on emission tax rate.â‘¢to build the mutual reaction game model between selection of policy and firms'behavior, and then to compute equilibrium results in order to find the rule for dynamic selection of incentive technology policy with emission tax and spillovers. It is found that, if the spillovers rate is lower than the critical value the best choice is he combination and at the same time firms take cooperative action, but if the rate higher than that value the best policy is subsidization and firms take non-cooperative action.