Internalisation of external effects vs. decrease of externalities: from end-of-pipe technologies to cleaner technologies

We try, in this paper, to emphasise the role of market structure in the adoption of cleaner production technologies. The paper comes within the framework of the research carried out around the Porter hypothesis, according to which the integration of environmental constraints by firms can induce an improvement of their competitive position. We show that cleaner technology becomes an instrument in the service of the firm's competitiveness. This idea contrasts sharply with the case of end-of-pipe technologies, whose adoption implies generally only a supplementary cost. The issue has already been put forward in the analytical framework of perfect competition. It is strengthened here in the more general case of imperfect markets. We construct a simple duopoly model in which the characteristics of market demand play a significant role in the adoption process.