In this paper, we address the incentives to invest in environmental innovation of enterprisesthat exercise market power in the output market and also buy and sell pollution permits.Differently from the existing literature, using a market approach we explicitly model theinteraction between the...

In this paper we analyze how the technology used by downstream firms can influence inputand output market prices. We show via an example that both these prices increase under adecreasing returns technology while the contrary holds when the technology is constant....