The Effects of Environmental Policy on the Performance of Environmental RIVs

Much of the potential impact of environmental policy is though to come from the incentives it gives firms to develop and introduce new environmental products and processes. Almost all the literature on this issue has focused on the impact of environmental policy on the amount environmental R&D that firms undertake, assuming that such R&D is undertaken independently or non-cooperatively. It is now widely recognized that there are considerable potential benefits from having firms undertake R&D cooperatively through research joint ventures (RJVs). In this paper we analyze the impact of environmental policy on the performance of environmental RJVs and underage an explicit welfare comparison of this performance against the counterfactual of a non-cooperative equilibrium. The framework we adopt is that developed by Katsoulacos and Ulph (1998) which identifies three stages in the innovative process -- research design, R&D; information sharing -- and endogenises each of these inter-related decisions in both the cooperative and non-cooperative equilibria. The case we examine is that in which governments cannot commit to environmental policy, so all these decisions have to taken anticipating