Can Environmental Policy Encourage Technical Change? Emissions Taxes and R&D Investment in Polluting Firms

• DOI: 10.1093/rfs/hhac003
• Publication Date: 2022-01-13T12:08:22Z
• Authors: James R Brown; Gustav Martinsson; Christian Thomann
• Keywords: Investment; Value (mathematics); Technical change

Abstract Higher country taxes on noxious manufacturing emissions lead to substantial increases in firms’ R&D spending. The response is entirely driven by those high-pollution firms most affected taxes. Pollution increase the marginal value of spending polluting firms, even when this does not new innovation. have strongest effect investment sectors which invention difficult appropriate and outside knowledge easier acquire, suggesting an important reason dirty invest expand their capacity absorb external technical know-how.