A tale of two market failures: Technology and environmental policy

By Adam B. Jaffe, Richard G. Newell, R. Stavins. 2005

1,681 citations recorded by the source corpus.

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 economicincentive 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.

Subfields: Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/616484fecaacfd63bed93cbb222a6c517caa326e

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Citations in the corpus

How do low-carbon policies promote green diffusion among alliance-based firms in China? An evolutionary-game model of complex networks (2019, background): “Both theory and empirical evidence suggest that the rate and direction of technological advancement is influenced by market and regulatory incentives (Jaffe et al., 2005).”
The innovation effects of environmental policy instruments — A typical case of the blind men and the elephant? (2011, background): “…study is that “market-based instruments for environmental protection are likely to have significantly greater, positive impacts over time than command-and-control approaches on the invention, innovation, and diffusion of desirable, environmentally-friendly technologies”(Jaffe et al., 2002a, 2002b).”
Conceptual and empirical advances in analysing policy mixes for energy transitions (2017, background): “Here, the rationale for using multiple policy instruments is said to rest on the existence of multiple market failures, each of which can be addressed by a different tool [43,32,23].”
Diffusion of low-carbon technologies and the feasibility of long-term climate targets (2015, background): “In the context of climate change, there are large uncertainties surrounding future impacts of climate change, the time and magnitude of policy response, and thus the likely returns to R&D investment (Jaffe et al., 2005).”
Policies for a more Dematerialized EU Economy. Theoretical Underpinnings, Political Context and Expected Feasibility (2016, background): “In a dynamic perspective [61], point to the superiority of taxes or permits in inducing the firm to adopt innovation beyond the level prescribed of the standard, if the innovation gives a cost advantage and hence allows saving on taxes or on purchasing the allowances.”
Political economy constraints on carbon pricing policies: What are the implications for economic efficiency, environmental efficacy, and climate policy design? (2014, background): “…from economic principles, a growing body of research has explored a variety of potential rationales for a mix of climate policies (Bennear and Stavins, 2007; Fischer and Newell, 2008; Fischer, 2008; Jaffe et al., 2005; Lehmann and Gawel, 2013; Lehmann, 2012; Sorrell and Sijm, 2003; Twomey, 2012).”