Transition to clean technologies and the impact of industrial non-compliant behavior

Abstract In this paper, we adopt an evolutionary model to describe the coevolution of technological transition and pollution in a country, where the choice of technology does not only give firms access to cleaner (but more expensive) or dirtier (cheaper and illegal) forms of production, but also access to social groups and information. Firms’ activity may be harmful to the environment and, due to the existence of ambient pollution charges, economic activity is affected by the level of pollution in the country. Our analysis describes how the evolution of the transition to clean technology and pollution generates a rich set of possible equilibria, which include stable pure strategies (where all firms choose the same technology) and inner equilibria (where both technologies could be adopted in the long run). We also observe more complex behavior and coexistence of different attractors as well as highlight the importance of initial conditions and uncover how the regulator may face possible pollution traps.