This paper characterizes environmental regulations which induce polluting Bertrand competitors to invest efficiently in environmental R&D. Post-innovation benefits to raising rivals' costs provide firms with incentives to innovate. Although optimal behavior cannot be elicited with pollution...

Concerns about energy security, reduced dependence on exhaustible fossil fuels and climate change have led to significant policy support for biofuels, particularly for cellulosic biofuels. The Biomass Crop Assistance Program and volumetric tax credits for biofuels seek to supplement the...