In a model where firms face a continuous choice of how much to invest in environmental innovation, we show that an ever stricter environmental policy does not always lead to ever cleaner production methods and ever lower production of polluting goods. It does so when the abatement technology is...

We consider an international emissions trading scheme with partial sectoral and regional coverage. Sectoral and regional expansion of the trading scheme is beneficial in aggregate, but not necessarily for individual countries. We simulate international CO2 emission quota markets using marginal...