Incentives to invest in abatement technology. A tax versus emissions trading under imperfect competition

In the longer run, effects on R&D and the implementation of advanced abatement technology may be at least as important as short-run cost effectiveness when we evaluate public environmental policy. Halvor Briseid Storrøsten's Discussion Paper shows that the number of firms that adopt advanced abatement technology could be higher with emissions trading than with a tax if there is imperfect competition in the permits market.