Industrial competitiveness and diffusion of new pollution abatement technology – a new look at the Porter-hypothesis
Working paper
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http://hdl.handle.net/11250/180427Utgivelsesdato
2004Metadata
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- Discussion Papers [1002]
Sammendrag
We study the relationship between industrial competitiveness, adaption of cleaner
production techniques and environmental policy. While other contributions have analyzed
environmental innovations with point of departure in the polluting firm, we introduce an upstream
market for new pollution abatement technology. A strong environmental policy may
then benefit industrial competitiveness through its effect on the price on pollution abatement.
However, the incentive for a stringent policy partly disappears if there is a global market for
pollution abatement solutions, and environmental policy is set simultaneously in several
countries.
In our analysis we hope to draw attention to an often overlooked issue. The diffusion of new
pollution abatement techniques often requires a new market to develop. If policy is lax, few
firms enter and may charge a high mark-up to cower entry costs. On the other hand, a
stringent environmental policy induces higher demand and allows a lower mark-up.
Consequently, even if the polluting industry in question is export oriented, a stringent policy
may be welfare enhancing.