Moving to Markets in Environmental Regulation: Lessons from Twenty Years of Experience

By Jody Freeman; Charles D. Kolstad | Go to book overview
Save to active project

16
Design, Trading, and Innovation

David M. Driesen

Proponents of economic incentives frequently state that emissions trading promotes technological innovation.1 This chapter examines the claim that this trading of compliance obligations fosters innovation. Although I use the term emissions trading throughout for the sake of concreteness, the claims made here apply fully to other kinds of environmental benefit trading

This chapter makes two theoretical claims and two empirical claims. The first theoretical claim is that emissions trading does a poorer job, in theory, of encouraging expensive innovation than traditional regulation. I will also argue that expensive innovation has special value that justifies the expense in some important cases. The second theoretical claim is that emissions trading may perform worse than traditional regulation in encouraging inexpensive innovation as well, at least in theory.2

My first empirical claim is that both emissions trading and traditional regulation have sometimes encouraged innovation and sometimes failed to do so. My second claim is that we do not have convincing empirical evidence that trading fosters innovation better than a comparably designed traditional regulation.

A casual review of the literature might lead one to assume that emissions trading's advantages in encouraging innovation are well established both in theory and empirically.3 The theory many academics mention most often, I will argue, focuses too much attention on the incentives trading creates for sellers of credits and pays too little attention to the incentives created for buyers. It also relies on a skewed picture of traditional regulation created by academic lawyers. In light of these problems with the basis for the trading encouraging innovation argument, it is not surprising

-436-

Notes for this page

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
Loading One moment ...
Project items
Notes
Cite this page

Cited page

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

Cited page

Bookmark this page
Moving to Markets in Environmental Regulation: Lessons from Twenty Years of Experience
Settings

Settings

Typeface
Text size Smaller Larger
Search within

Search within this book

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

While we understand printed pages are helpful to our users, this limitation is necessary to help protect our publishers' copyrighted material and prevent its unlawful distribution. We are sorry for any inconvenience.
Full screen
/ 488

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.

Are you sure you want to delete this highlight?