new pieces of knowledge are produced in a R&D sector and used to reduce pollution emissions. Using this model along with a …

emissions permits would certainly be better than a equilibrium since it would entail a lower pollution level. However, it is far … from clear that an economy with pollution permits would be preferable over an economy with emissions taxes. While in both … cases pollution would be lower, growth would be higher in an economy with emissions taxes. This is because emissions permits …