International Review of Environmental and Resource Economics > Vol 5 > Issue 1

Evidence of Innovation and Diffusion Under Tradable Permit Programs

Allen S. Bellas, Metropolitan State University, USA, , Ian Lange, University of Stirling, Department of Economics (3B72),
Suggested Citation
Allen S. Bellas and Ian Lange (2011), "Evidence of Innovation and Diffusion Under Tradable Permit Programs", International Review of Environmental and Resource Economics: Vol. 5: No. 1, pp 1-22.

Publication Date: 23 May 2011
© 2011 A. S. Bellas and I. Lange
Environmental Economics
Pollution controlTradable permitsTechnological advanceTechnological diffusion


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In this article:
1 Introduction 
2 Summaries of Various Permit Programs from Recent History 
3 Theoretical Literature 
4 Methodologies of Identifying Technological Change and Innovations 
5 Papers Results 
6 Discussion 
7 Conclusion 


There have been five large tradable permit programs (US Acid Rain Program, US Nitrogen Budget Program, Los Angeles Regional Clean Air Management Program, EU Emissions Trading Scheme, and the US Lead Phase Down) in effect long enough to have potentially yielded data to test whether the program altered the rate of innovation and/or diffusion of abatement technology. This paper is an overview of the literature concerning empirical evidence (or lack thereof) of innovation by the firms that comprise the industries affected by these tradable permit programs. We briefly discuss the methods used to determine technological advance and then more thoroughly review existing studies examining advances in pollution control technology under permit programs. Finally, some overarching observations are presented.