Incentives for environmental technological innovation in emission trading

The incentive model was set up to totally explain the incentive issues on the environmental technological innovation of firms in emission trading as viewed from welfare, introducing the function of trading cost based on the Fischer endogenetic technological innovation model. The process of environmental technological innovation considering trading cost was solved. We find that the optimal pollution abatement is related to such factors as price of emission trading, marginal trading cost, current technology and so on. Therefore, the suboptimal equilibrium rather than the most efficient abatement is obtained. We also sum up six components on incentives for environmental technological innovation of firms in emission trading, which is a contributor to complete describe for incentive environmental technological innovation of firms in emission trading.