Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/316352 
Year of Publication: 
2025
Series/Report no.: 
Helsinki GSE Discussion Papers No. 35
Publisher: 
Helsinki Graduate School of Economics, Helsinki
Abstract: 
Heterogeneous monopolists produce goods using either brown technology, which relies on labor and carbon energy, or green technology, which relies solely on labor. R&D firms enhance productivity using labor to outcompete existing monopolists, thereby driving economic growth. The extraction of carbon energy releases pollutants that harm production and increase the risk of environmental disaster. The government can optimally mitigate the distortions caused by pollution by a two-part Pigouvian tax on carbon energy, with one part being precautionary, applied only before any disaster occurs. When this tax is optimally set, R&D should neither be taxed nor subsidized.
Subjects: 
R&D
endogenous growth
environmental disaster
precautionary policy
JEL: 
H21
O32
O44
Q52
Q54
Q58
ISBN: 
978-952-7543-34-4
Document Type: 
Working Paper

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