Amrita Ray Chaudhuri – University of Winnipeg, Canada
We investigate the impact of patent policies and emission taxes on green innovation, allowing for strategic interaction of firms. We find that the greater the proportion of green-conscious consumers, the less likely firms are to license green innovation, which results in higher emissions levels, unless the emission tax is increased beyond a certain threshold. At the same time, there exists a second threshold level of the tax beyond which increasing the emission tax leads to increasing the emission level. This paradox can be mitigated by decreasing patenting costs and/or making the patentability requirement stricter.