Profit-maximizing R&D in response to a random carbon tax [An article from: Resource and Energy Economics]

This digital document is a journal article from Resource and Energy Economics, published by Elsevier in 2006. The article is delivered in HTML format and is available in your Amazon.com Media Library immediately after purchase. You can view it with any web browser.

Description:
This paper determines a firm's profit-maximizing R&D response to an uncertain carbon tax, for two different R&D programs: cost reduction of low carbon energy technologies and emissions reductions of currently economic technologies. We find that optimal R&D does not increase monotonically in a carbon tax. R&D into alternative technologies increases only if the firm is flexible enough; R&D into conventional technologies first increases then decreases in a carbon tax. Firms that are very flexible may increase R&D into alternative technologies when the uncertainty surrounding a carbon tax is increased; otherwise firms will generally decrease R&D investment in uncertainty.