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On imperfect competition and market distortions: the causes of corporate under-investment in energy and material efficiency

Rentschler, J; Bleischwitz, R; Flachenecker, F; (2018) On imperfect competition and market distortions: the causes of corporate under-investment in energy and material efficiency. International Economics and Economic Policy , 15 (1) pp. 159-183. 10.1007/s10368-016-0370-2. Green open access

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Abstract

In practice firms are faced by a range of market frictions and barriers, which can prevent them from undertaking investments in efficiency and low-carbon technologies. Thus, even when environmental taxes are imposed, firms may be unable (or unwilling) to adjust their behaviour and technology in response to price signals. With a focus on energy and material efficiency investments, this paper systematically investigates how the theoretical assumptions of perfectly competitive and efficient markets are violated in practice, and how this results in complex and interlinked investment barriers. It classifies five categories of investment barriers: information, capacity, and financial constraints, as well as uncompetitive market structures and fiscal mismanagement; and presents evidence on each of these. It concludes by proposing a range of measures for mitigating investment barriers, and addressing their structural causes. Overall, the evidence presented in this paper aims to help increase the effectiveness of environmental taxes and regulation, by identifying market imperfections that environmental taxes alone cannot address.

Type: Article
Title: On imperfect competition and market distortions: the causes of corporate under-investment in energy and material efficiency
Open access status: An open access version is available from UCL Discovery
DOI: 10.1007/s10368-016-0370-2
Publisher version: http://dx.doi.org/10.1007/s10368-016-0370-2
Language: English
Additional information: This version is the author accepted manuscript. For information on re-use, please refer to the publisher’s terms and conditions.
Keywords: Investment barriers, Efficiency, Firms, Environmental taxes
UCL classification: UCL
UCL > Provost and Vice Provost Offices > UCL BEAMS
UCL > Provost and Vice Provost Offices > UCL BEAMS > Faculty of the Built Environment
UCL > Provost and Vice Provost Offices > UCL BEAMS > Faculty of the Built Environment > Bartlett School Env, Energy and Resources
URI: https://discovery.ucl.ac.uk/id/eprint/1531939
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