Show the impact of a technology-forcing standard on a polluter? Incentive to invest in R&D to reduce compliance costs.

 

EXAMPLE Incentives to invest in new technologies under emission standards Figure 11-5 shows marginal abatement costs of a firm in two situations. MAC refers to such costs before a given technological improvement. MAC2 is the marginal abatement cost curve the firm could expect to have after investing resources in R&D to develop better treatment or recycling technology. To be concrete, let FIGURE 11-5 Incentives to Invest in New Pollution-Control Technology under a Standard $(thousands) 200 160 100 MAC MAC MAC = 200 - 5E MAC = 160-4E MD = 5E 10 1 I I 17.78 20 H Eg Ey 30 MD 40 11 Eo Emissions (tonnes per year)