DYNAMIC INCENTIVES OF ENVIRONMENTAL-REGULATIONS - THE EFFECTS OF ALTERNATIVE POLICY INSTRUMENTS ON TECHNOLOGY DIFFUSION

We develop a framework for comparing empirically the effects of altern ative environmental policy instruments on the diffusion of new technol ogy. ''Market-based'' and ''command-and-control'' approaches can be qu antitatively compared by estimating the economic penalty that firms, t hrough their actions, reveal to be associated with violation of standa rds. In the context of concerns about global climate change, we empiri cally examine the likely effects of Pigouvian taxes, technology adopti on subsidies, and technology standards. We employ state-level data on the diffusion of thermal insulation in new home construction, comparin g the effects of energy prices, insulation cost, and building codes. ( C) 1995 Academic Press, Inc.