The action mechanism analysis of environmental pressures on the development of environmentally friendly technologies using a neo-schumperian model.

In order to analyze the action mechanism of environmental pressures on the development of environmentally friendly technologies (EFTs), this paper constructs a neo-schumpeterian simulation model containing firms' production, pricing, pollution abatement investment, (environmental) R&D, entry & exit decision-making and consumer choice behavior. The objective of this paper is to investigate the influence of consumer demand preferences and environmental policies on firms’ environmental investment decision-making as well as the development of EFT. Results showed that consumers prefer product price, a market-based instrument (MBI) combined with an information-oriented instrument (IOI) can promote the development of EFT, while MBI applied alone will reduce environmental investment. Under scenarios that consumers prefer product quality, a command and control environmental policy (CAC) can promote the development of EFT to a greater extent, but it inhibits environmental investment and damages the average profit rate of profit of the industry. If consumers prefer environmental performance of firms, CAC or IOI is advantageous to the change of EFT. However, in such a case environmental investment and consumer utility are reduced. [ABSTRACT FROM AUTHOR]