Rabah Amir

The purpose of the proposed research is to investigate the interplay between environmental innovation (and thus ultimately sustainability) and market structure (typically some form of imperfect competition). This project will naturally bring together multiple strands of literature from several di¤erent scienti…c disciplines, including economics (environmental economics, industrial organization and regulation), applied mathematics (game theory techniques), and ecology/environmental science (speci…cally relating to sustainability, broadly de…ned). A key aim of the project is to bring the literature on environmental research and development (or R&D) up to a level comparable to that of process innovation in industrial organization, partly by adapting ideas and insights already implemented in the latter literature. The main issues deal with (i) the formal modeling of environmental innovation itself, (ii) the interplay between market structure and propensity for innovation, with market structure being broadly interpreted as including the possibility that …rms may cooperate in the conduct of environmental R&D, provided they do not collude in the product market. We shall study several theoretical models, with three prototypes presented below. The …rst is a model that sheds light on the e¤ects of environmental R&D on the shape of the marginal abatement cost (MAC) curve. The second aims to study the merits of environmental R&D cooperation amongst …rms that will continue to compete on the product market. The third sub-project is a comparative study of two command instruments for regulating polluting …rms that are widely used in actual environmental policy. Environmental R&D includes investment to improve the e¢ ciency of end of pipe cleaning technologies or any abatement technology that would lower the key ratio of emissions per unit output. While the literature on environmental R&D has often focused on …rms operating in perfectly competitive markets, recent perception has underlined the importance of imperfect competition. We consider several new models to this recent literature that allow to consolidate our understanding of the important issues in the interplay between market forces under imperfect competition and environmental sustainability.