A three-stage game including investments, environmental quality provision and price competition is developed to study the impact of green technology investment (ecolabeling), in a duopoly model of vertical product differentiation. The firms' incentives to invest in green technologies depend on their relative cost structure. When firms are identical with respect to fixed costs, both firms will always invest, but if one firm is more efficient in investing, then the other firm may or may not invest depending on the level of unit cost of investment. Quality competition will be tighter when the low quality firm is more efficient, and looser when the high quality firm is more efficient in investing. Socially optimal investment for both firms is always positive, but lower than in the duopoly solution. In the absence of environmental externalities, the quality dispersion chosen by profit maximizing firms may be too high or too low, while environmental externalities increase the possibility of too low quality dispersion in the market solution. Finally, and importantly, ecolabeling can be used as a means of reducing excessive investment and increasing too low environmental quality.
This paper draws on the European Union's Bioeconomy Action Plan (BAP) to clarify the notion "bioeconomy" and examine how it relates to the forest sector and its current challenges. The interpretation is linked to a broader context of climate and energy policies and the ideas of green economy and green growth. It is shown that, despite its good intentions, BAP fails to link bioeconomy to the core idea of green economy and the sources of economic growth. It hardly discusses climate policies and entirely omits the land-use aspects between agriculture and forestry that are important for climate policies. An equally serious shortcoming is that BAP very vaguely recognizes the role and nature of the forest sector as a high-tech biomass utilizing sector and omits its current challenge to renew the product matrix from forest biomass as a response to the decreasing demand for paper. An overview of the topical issues in forest sector shows that it has and will have a great role in bioeconomy as a high-tech and high value-added sector producing all traditional products, bioenergy, and new forest products.
Environmental and economic performance of forestry on drained peatlands was reviewed to consider whether continuous cover forestry (CCF) could be a feasible alternative to even-aged management (EM). CCF was regarded feasible particularly because continuously maintaining a tree stand with significant transpiration and interception capacity would decrease the need for ditch network maintenance. Managing CCF forests in such a way that the ground water levels are lower than in clear-cut EM forests but higher than in mature EM forests could decrease greenhouse gas emissions and negative water quality impacts caused both by anoxic redox reactions and oxidation and mineralization of deep peat layers. Regeneration studies indicated potential for satisfactory natural regeneration under CCF on drained peatlands. An economic advantage in CCF over EM is that fewer investments are needed to establish the forest stand and sustain its growth. Thus, even if the growth of trees in CCF forests were lower than in EM forests, CCF could at least 2 in some peatland sites turn out to be a more profitable forest management regime. An advantage of CCF from the viewpoint of socially optimal forest management is that it plausibly reduces the negative externalities of management compared to EM. We propose that future research in drained peatland forests should focus on assessing the economic and environmental feasibility of CCF.
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