Clean Techn Environ Policy DOI 10.

1007/s10098-011-0435-4

ORIGINAL PAPER

The policy impact on clean technology diffusion

Yi-Tui Chen Dong-Shang Chang Chia-Yon Chen Chu-Chieh Chen

Received: 1 August 2011 / Accepted: 15 November 2011 Springer-Verlag 2011

Abstract We employ a logistic model to examine the impacts of environmental policy (emission standards and economic instruments) and plant characteristics on clean technology diffusion by using the amount of total suspended particulate (TSP), sulfur oxide (SOx), and nitric oxide (NOx) emissions in 14 power plants provided by Taiwan Power Company covering the period of 19892006. The concentration of the pollutants emitted to air from fossil-red power plants is modeled as the performance of technology development. The objective of this study is to investigate the determinants of technology diffusion to help generate strategic insights on environmental policy. The results show that the environmental policy by regulating emission standard provides a negative effect on technology diffusion while the mixed policy (an
Y.-T. Chen (&) Department of Health Care Management, National Taipei University of Nursing and Health Sciences, 89, Nei-Chiang St., Wan-Hua Dist., Taipei, Taiwan, ROC e-mail: yitui@ntunhs.edu.tw D.-S. Chang Department of Business Administration, National Central University, 300, Jhongda Road, Jhongli City, Taoyuan County 32001, Taiwan, ROC e-mail: changds@mgt.ncu.edu.tw C.-Y. Chen Department of Resources Engineering, National Cheng Kung University, 1, Ta-Hsueh Road, Tainan, Tainan County 701, Taiwan, ROC e-mail: mjchen@mail.ncku.edu.tw C.-C. Chen Department of Health Care Management, National Taipei University of Nursing and Health Sciences, No. 89, NeiChiang St., Wan-Hua Dist., Taipei City 108, Taiwan, ROC e-mail: chuje@ntunhs.edu.tw

integration of environmental standards and economic instruments) has a signicantly positive effect on technology diffusion for NOx but insignicantly for TSP and SOx. Keywords Logistic model Clean technology Technology diffusion Emission standard

Introduction Many researchers have shown that the diffusion of normal technology follows a pattern of logistic curve over time and employed such a logistic model for the forecasting of normal technology development (Islam and Meade 2000; Mahajan and Muller 1996; Sohn and Ahn 2003; Hu and Tseng 2009), but very few focus on the diffusion of clean technology (Kemp and Volpi 2008; Cohen and Levinthal 1990). Many researchers have attempted to derive the cause in affecting technology diffusion. Watanabe and Asgari (2004) argue that innovations interact with institutions and display systematic changes in their process of growth and maturity and Lee et al. (2003) focus on how institutional factors and the characteristics of innovations affect technology diffusion. The other stream of research focuses on the role of public policy in association with Research & Development (R&D) funding and the protection on innovations. Tan (2010) indicates that the dominant role of the public sector and R&D funding in clean technology and the policy may spur the rms to innovate clean fgren (2010) investigate the technology. Hammar and Lo technology adoption on rms level in Sweden and focus particularly on differences between the decisions to adopt end of pipe solutions and clean technologies. Bandyopadhyay (2011) indicates that different treatment of end of pipe methods may be series attention to reduce CO2

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emission of ue gas streams. They nd that rms investment in clean technologies to reduce emission depending on if the rm has expenditures for R&D related to environmental protection. R&D funding for promoting technology development has been seen as important tools, but many studies conclude that they are often rather inefcient (Carraro and Siniscalco 1994). Among the institutional characteristics to inuence the diffusion of environmental technology, the rst and most important motive could be statutory regulations that force the producers to comply with renewed environmental regulations. A great number of studies have examined the effects of environmental policy instruments on innovations and their diffusion (Hahn and Stavins 1992; Jaffe et al. 2002; Klemes 2010) and nd that environmental regulations often promote technology diffusion (Jaffe and Stavins 1995). On the contrary, some other researchers argue that environmental regulations do not provide any additional incentive to technology development after the requirements have been met (Jaffe and Stavins 1995). The purpose of this study is to empirically examine how the power plants adopt the green technology and how the diffusion pattern improves environmental performance. We model the emission concentration of total suspended particulate (TSP), sulfur oxide (SOx), and nitric oxide (NOx) as technology progresses and examine the causes and the pattern for the technology improvement. We also attempt to analyze the policy impacts on the adoption of environmental technology for ue gas emission reductions.

Review of Taiwans policy practices Since 1987, Taiwan has claimed to follow the concept of sustainability issued by WCED (World Commission on Environment and Development) which served as a directive to orient governmental policy was extended to the state level. Environmental policy is seen as a tool to reduce environmental impacts by integrating with technology innovation. It is basically divided into: environmental standards (command-and-control) and economic instruments (environmental taxation such as emission charges, user charges, product charges or taxes (Elms and El-Halwagi 2010), administrative charges or fees, subsidies, deposit fund schemes, marketable permit arrangements, and nancial enforcement incentives or nancial assistance). The combustion process of fossil-red power plants in general emits a diverse type of air pollutants to the environment. The major pollutants emitted by the ue gas of power generation plants include TSP and acid gases (SOx and NOx) that are formed as a part of normal combustion processes. In Taiwan, the setup of environmental standard and enforcement of the emission standard have been employed

as the main means to control air pollution arising from fossil-red plants. Before 1994, it was the only way to control air pollution. As Taiwan Environmental Protection Administration (EPA) recognized that technological change can help to achieve environment preservation targets, it announced a renewal program of ue gas emission standards for fossil-red power generation plants in 1994 (please see Table 1). The regulation of emission standard is roughly divided into two versions based on the effective date of implementation: the 1994 Standard (effective after May 1994) and the 2001 Standard (effective after July 2001). Zhou et al. (2004) imply different power plants have different emission characteristics depending on plant size, fuel type, etc., and the emission standards in the both two versions vary across the location, age, and size of power plants, the types of fuels and power generation technology (classied into steam turbine, combined cycle turbine, gas turbine, diesel turbine, etc.). It is frequently claimed that the implementation of an environment standard system, (i.e., command-and-control system) is believed to be ineffective in promoting innovations as some researchers argue that the environmental standard system has not been successful in promoting pollution prevention at source and neither particularly favor the development and adoption of cleaner technologies in industry (Granderson 1999; Huhtala 2003). The compliance with emission standards might, however, produces incentives to preempt future changes in regulations (i.e., stricter standards). Under such a case, a major challenge that recognized for the regulatory authorities is environmental policy of command-and-control and it seems to work for the design of current regulatory schemes in promoting existing technologies, but it does not provide any incentive for innovation of technology. Thus, it is difcult to induce processes embedded innovation when the current technology gradually becomes obsolete and counterproductive (Reijnders 2003). Environmental economists argue that economic instruments are superior with respect to inducing innovations, since they impose a cost on pollution irrespective of its level and, therefore, provide a continuous incentive to innovate (e.g., Milliman and Prince 1989; Jung et al. 1996). Consequently an environmental tax system may promote the adoption of process changes or the use of less-polluted raw material, i.e., the pollution improvements at source. Under such a circumstance, the Taiwan Air Pollution Prevention Law announced that Taiwan the administrative authority can choose the policy options by imposing environmental tax on pollutant emissions. In 1999, Taiwan EPA issued an administrative order to charge the air pollution tax for SOx and NOx released from fossil-red power plant. In order to motivate pollution abatement, a reduction of tax rate is implemented based on the contribution of pollution reduction (please see Table 2). As to the

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The policy impact Table 1 The renewal regulation of SOx and NOx emission standards for fossilred power generation plants in Taiwan

Steam turbine TSP Oldb Standard 1a for region Ac (1994, 5), Standard 2a for region Bc (1994, 5)d, standard 2 (2001, 7) Standard 2 (1994, 5)

Gas turbine, combined cycle turbine

Standard 1 for region A (1994, 5), Standard 2 for region B (1994, 5), standard 2 (2001, 7) Standard 2 (1994, 5)

Newb SOx Gas Old New Oil Old

50 ppm (1994, 5) 50 ppm (1994, 5) 300 ppm for urbane regions 1994, 5), 500 ppm for other regions (1994, 5), 300 ppm (2001, 7) 300 ppm (1994, 5) 200 ppm for urban regions 1994, 5), 500 ppm for other regions (1994, 5), 200 ppm (2001, 7) 200 ppm (1994, 5)

50 ppm (1994, 5) 50 ppm (1994, 5) 300 ppm for urban regions 1994, 5), 500 ppm for other regions (1994, 5), 300 ppm (2001, 7) 300 ppm (1994, 5) 200 ppm for urban regions 1994, 5), 500 ppm for other regions (1994, 5), 200 ppm (2001, 7) 200 ppm (1994, 5)

a b

Please see Appendix

New Coal Old

old Plant refers to the plant that was installed before April 12, 1992 Region A contains Keelung City, Yilan County, Taoyuan County, Shinchu County, Shinchu City, Miaoli County, Taichung City, Taichung County, Changhwa County, Nantou County, Yinlin County, Chiayi County, Chiayi City, Tainan County, Tainan City, and Penghu County while the remaining regions belong to Region B Effective date in parentheses Urban regions are consisting of Taipei City, Taipei County, Kaohsiung City, Kaohsiung County, Taichung City, Taichung County, Taoyuan County, Changhwa County, Nantou County, Pingtung County, and Keelung City

New NOx Gas Old

300 ppm (1994, 5) for region A, 150 ppm (1994, 5) for region B, 120 ppm (2001, 7) 100 ppm (1994, 5) 400 ppm (1994, 5) for Region A, 250 ppm (1994, 5) for region B, 200 ppm (2001, 7) 180 ppm (1994, 5) 500 ppm (1994, 5) for region A, 350 ppm (1994, 5) for region B, 300 ppm (2001, 7) 250 ppm (1994, 5)

80 ppm

New Oil Old

40 ppm 250 ppm

d e

New Coal Old

120 ppm 250 ppm

New

120 ppm

emissions of volatile organic compounds (VOCs), the tax imposition started from January 1, 2007. In summary, Taiwan environmental policy for air pollution over the last decade has been characterized by three phases. During Phase I (before 1994), Taiwan EPA implemented a series of environmental policies to control pollution emissions in the industry. These policies are derived from the perspective of end of pipe treatment and the control on the air pollution from power plants was loosely implemented. Because of the loose implementation of environmental policy, rms took the new clean technology to comply with the environmental standards at once, but rms have no incentive to innovate the new technology when rms have achieved the environmental standards. As a public enterprise under the protection of legally regulated rate of return, TPC did not care too much

on the cost increase for pollution abatement and committed itself to comply with the emission standards. Phase II starts from 1994 to 2001. In 1994, a new emission standard was released. Taiwan EPA jumped a big leap to a stricter emission standard based on the currently operated technologies, and announced in advance for a stricter standard that would be implemented at a later stage (in 2001) with more ambitious objectives. During Phase III starting from the end of 2001, more ambitious emission reduction objectives as well as a series of incentive policies in terms of taxation were implemented toward air pollution reduction to stimulate the investment of pollution abatements. In 2001, the emission standards in all the power plant had to comply with the stricter emission standard (the 2001 Standard) and pay the pollution tax based on the emission concentration and emission quantity of pollutant.

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Y.-T. Chen et al. Table 2 Environmental tax for SOx and NOx Pollutants SOx Tax rate (NT$/kg) 10 7.5 5 2.5 0 NOx 12 6 3 1.5 0.75 0 Remarks Emitted from the xed source The average concentration in a month is lower than 20% of regulatory emission standards The average concentration in a month is lower than 10% of regulatory emission standards The average concentration in a month is lower than 5% of regulatory emission standards The fuel used in the plant belongs to low-pollution categories approved by the government Emitted from the xed source The average concentration in a month is lower than 75% of regulatory emission standards The average concentration in a month is lower than 50% of regulatory emission standards The average concentration in a month is lower than 30% of regulatory emission standards The average concentration in a month is lower than 10% of regulatory emission standards The fuel used in the plant belongs to low-pollution categories approved by the government

Research methods The trajectory of technological progress is modeled with a simple logistic function by analogizing between the epidemic process and the social adoption process. It postulates that the proportion of adopters rises at an accelerating rate during the early stages of diffusion and then declines until the population of potential adopters has been exhausted. A great number of technology diffusion researches present a logistic model to nd the pattern of diffusion over time for technological forecasting (Islam and Meade 2000; Mahajan and Muller 1996; Sohn and Ahn 2003), and some attempt to explain the particularly specic patterns of social diffusion or technological growth through empirical testing (Meyer 1994; Meyer and Ausbel 1999; Kemp and Volpi 2008). Some researchers argue that information transfer and learning effect are the major factors to affect technology diffusion (Kemp and Volpi 2008; Stoneman 2001). Knowledge diffusion or technology diffusion can provide opportunities for learning, acquiring, sharing, and innovating (Krogh et al. 2001; Madhavan and Grover 1998). As discussed in the previous section, Fig. 1 shows the performance of pollutants emissions, reecting the adoption of cleaner technology. And thus, technology improvement, measured in terms of pollutant emission concentration, is modeled as a logistic growth that depicts the diffusion of technology, expressed as  dx x ax 1 1 dt F where x is the concentration of pollutant emissions, and a denotes technology diffusion coefcient with a [ 0, and F is the potential carrying capacity. A difference function is employed, and thus Eq. 1 becomes

800 700 600 500 400 300 200 100 0

90 96 04 20 92 94 20 00 20 02 19 98 19 19 19 19 20 06

TSP SOx NOx

Fig. 1 Trends in the concentration of pollution emissions (19902006). Remarks: TSP (lg/m3), SOx (mg/Nm3), and NOx (mg/Nm3)

 x t 1  x t x t 1 ax t 1 1 2 F A sizable part of the rise in technology progress is attributable to the renewal of environmental regulations in addition to some minor factors. Policy effect has a direct effect on the rm for the promotion of technology diffusion. Kline (1995) has surveyed the impact of public policy on the diffusion and implementation of electronic data interchange among rms. Klaus et al. (2006) analyze how to achieve the environmental modernization of the economy and conclude that the implementation of environmental policies linking with environmental management can promote the technical environmental innovations and economic performance. Some researchers argue that the age structure of existing plants, size, and regulatory pressure should be considered in the model for assessing the heterogeneity of technology adopters and adopter environments (e.g., Kemp and Volpi 2008), and thus parameter

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a is dened as function of environmental policy, plant size, and age a a0 a1 I1 t a2 I2 t a3 cap a4 age 3

where I1(t) and I2(t) are two indicator functions to represent the three time intervals (before 1994, 19942000, and after 2000), cap denotes the installed capacity of power generation plants, and age measures the operating years from start-up. As Taiwan EPA started to implement the renewed emission standard of ue gas in 1994, and the mixed policy in end of 1999, thus I1(t) = 1 for t = 1994, 1995, , 2006, otherwise I1(t) = 0, and I2(t) = 1 for t = 2000, 2001, , 2006, otherwise I2(t) = 0. Substituting Eq. 3 into Eq. 2 and adding an error term e yields an empirical nonlinear model listed below: xt b1 xt1 b2 x2 t1 b3 I1 txt1 b4 I2 txt1
2 b5 capxt1 b6 agext1 b7 I1 tx2 t 1 b 8 I 2 t x t 1 2 b9 capx2 t1 b10 agext1 b11 typeI b12 typeII et

due to exogenous policy intervention or endogenous factors. When comparing to the regulatory emission standards in Table 1, we see that the acceleration in the mitigation of air pollutant emissions occurred after the passage of the release and implementation of the 1994 Standard and seemed little change after that of the 2001 Standard. The preliminary examination suggests that the 1994 Standard seems to have a large impact on the emissions of air pollutants in fossil power plants.

Results The estimated coefcients for TSP, SOx, and NOx are listed in Table 3, respectively. The results of this article suggest that the diffusion of abatement technology for NOx removal follows an S-Shaped pattern (logistic curve) while the reduction of the other two pollutants executes a linear pattern. Integrating Eqs. 24, we obtain b1 1 a0 ; b2 a0 a1 F ; b3 a1 ; b4 a2 ; b5 a3 ; b6 a4 ; b7 F ; b8 a3 a2 a4 F ; b9 F , and b10 F . Based on these equations, we derived the technology diffusion impacts and summary the results in Table 4. Based on the signicant value of b1 = 0.625297 = 1 - a0 for TSP emissions that shown in Table 3, the value of a0 is calculated to and found to be positive. This result assures that the new abatement technology adopted in one plant may spill over to other plants autonomously. In contrast, the values of a0 are signicantly negative for SOx emissions and NOx emissions. Table 4 demonstrates that the TSP abatement technology may diffuse autonomously while a negative diffusion occurs in SOx and NOx abatement. Several explanations are proposed here for the opposite direction of autonomous diffusion. TSP is typically composed of suspended dusts and metals generating from combustion processes of power generation and thus the abatement technology in general requires the appropriate physical or chemical treatment to remove the particle by means of bag lters, electrostatic participators or scrubbers. The characteristics of TSP abatement technology may be considered to be more maturated and, therefore, TPC has the capability to develop its own technology and diffuse across the plants within the rm. The technology of autonomous diffusion depends on the learning-by-doing and the accumulated human capital with the organization and it requires the match between the level of human capital and the required technology. On the contrary, TPC requires external suppliers for the support of the abatement technology for SOx and NOx, and qualies workers to learn to use the new technology. Furthermore, a training program should be offered to employees. As TPC is protected and

4 where typeI and typeII are two dummy variables to measure the type of power generation plants which are classied into coal-red, oil-red, and gas-red plants. The observed samples cover 14 plants over the period of 17 years, and thus i is added to the subscript of each variable, denoting the ith plant. Data The power generation produced by fossil-red plant including coal, heavy fuel oil, and natural gas increase from 66.84% of the total electrical power supply in 1995 to 73.44% in 2000. Among the fossil-red power generation, gas power generation has a tendency to grow compared to the other two types of power generation due to the motivation of energy policy since gas red power plant is believed less polluted and benecial to the environment. The annual data are collected including the emitted concentration of SOx, NOx, and particulates emitted by each fossil fuel power plants by TPC covering the period from 1989 to 2006, provided by Taiwan Power Company (TPC 2007). The pattern of the air emission concentration of TSP, SOx, and NOx from fossil-red plants is plotted against time in Fig. 1. We argue that the observed pattern of the air pollutant emission can be interpreted in terms of a model of the diffusion of clean technology. In Fig. 1, it demonstrates the average concentration of SOx, NOx, and particulates of the selected plants, depicting a continuous decreasing trend. It points out that there is a conspicuous jump, particularly from 1994 for TSP and 1998 for SOx, in the diffusion trajectory. It is essential to understand if this jump is

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Y.-T. Chen et al. Table 3 Estimated coefcients of Eq. 1 Variables xt1 x2 t 1 I1(t) xt1 I2(t) xt1 cap xt1 age xt1 I1(t) x2 t 1 I2(t) x2 t 1 cap x2 t 1 age x2 t 1 TypeI TypeII R2 Adjusted R2 Number of obs. Standard errors in parentheses Signicance levels are denoted by * (10%), ** (5%), and *** (1%) TSP emissions 0.625297*** (0.057688) 0.000121 (0.000102) 0.534487*** (0.196391) 0.157208 (0.522325) -0.0002** (8.69E-05) 0.00235** (0.000928) -0.00678*** (0.001931) -0.01266 (0.022887) 4.52E-07*** (1.16E-07) -5.9E-06*** (1.68E-06) 2.346411 (4.415234) -5.57942 (5.601713) 0.922855 0.914675 238 1.47E-08 (7.77E-07) -2.8E-05 (1.71E-05) 16.21746 (11.64063) -30.2136 (12.0492) 0.976126 0.970798 238 SOx emissions 1.12264*** (0.350399) 0.000668 (0.000594) 0.4376*** (0.092545) -0.11166 (0.149349) -0.00088* (0.000496) -0.00164 (0.009796) -0.00114*** (0.000179) 0.000566 (0.000595) NOx emissions 1.015689*** (0.069294) -0.00047*** (0.000126) 0.335832*** (0.092742) -0.30977*** (0.107941) 0.000134 (0.000115) 0.002212* (0.001187) -0.0018*** (0.000345) 0.00152** (0.000613) -1.6E-07 (1.46E-07) -9.8E-07 (1.65E-06) -20.2023*** (6.721025) -15.8604** (7.807465) 0.922619 0.915178 238

Table 4 The impacts of the explanatory variables affecting technology diffusion rate TSP SOx ?, positive effect; - negative effect; 0, no effect NOx

Auto effect ? -

Policy effect 94 effect 01 effect 0 0 ?

Size of plant ? ? -

Age of plant 0 -

Type of technology 0 0 ?

monopolized with a regulated rate of return, the extra costs incurred from investment on clean technology do not yield any impact on revenues or returns. The resistance to new technologies may arise from employees reluctance to adopt new innovations. Under such a circumstance, it blocks the technology diffusion and thus the external force is required to motivate TPC in investing new-developed technology for SOx and NOx abatements. In addition to the natural diffusion a0, some of the other diffusion coefcients are also found to be signicant. Table 4 also demonstrates that the technology diffusion also depends upon environmental policy, the size, working years, the carrying capacity, and the type of technology (e.g., the fuel type for power generation). The value of a1, that denotes the coefcient for the environmental policy of 1994 standard renewal, is derived by b3 = -a1 and found to be signicantly negative for all the three types of pollutants. In contrast, a2 that represents for the impacts of 2001 standard renewal, is found to be signicantly positive for NOx emissions. The emission standard renewal

program in 1994 inuences all the three type of pollutants but in different directions while the renewal program in 2001 has positive impacts on NOx abatement technology diffusion. Based on the average emission concentration of the three pollutants calculated (please see Table 5) and compared to the emission standard issued in 1994 (please see Table 1), we can conclude some interesting points: (1) The policy impact in Phase II (year 19942001) has signicantly impacted on TSP abatement, but not in Phase III (after end of 2001). The TSP emission concentration has been reduced from 88.35714 mg/ Nm3 in 1992 to 36.7857 mg/Nm3 in 1994, which is much lower than the legally regulated emission standard of 4769 mg/Nm3 in 1994 and 3947 mg/ Nm3 in 2001. In this case, the policy effect gradually disappears after 1994 and the technology diffusion is determined by the size and age of the plant and autonomous effects.

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The policy impact Table 5 The average concentration of the three pollutants Year 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 TSP (ppm) 226.6429 132.9286 88.35714 39.28571 36.78571 33.57143 28.42857 25.85714 20.35714 18.00000 14.57143 16.53571 16.71429 18.14286 18.85714 16.35714 15.21429 SOx (mg/Nm ) 708.9286 605.0714 520.2143 480.7143 383.0000 326.9286 286.8143 205.5357 192.7143 169.9500 153.7786 156.0571 146.3857 140.4429 142.0214 145.2714 151.7143
3

NOx (mg/Nm ) 280.5000 247.5000 232.5000 222.4286 187.5714 190.8571 186.5714 195.7143 185.7143 170.1429 130.4286 123.7857 124.2857 122.9286 118.2857 123.5714 129.5714

(2)

(3)

The trend of SOx concentration has the same pattern as that of TSP and, thus, the policy effect on SOx executes a similar way like TSP. The emission standard renewal at both the two phases provides signicant impacts on NOx emissions, but in an opposite direction. The standard renewal in 1994 discouraged the adoption of newer NOx abatement technology since the emitted concentration in 1994 is far below the 1994 standard but still higher than the 2001 standard. Thus, the 2001 Standard works as a motivator to improve technology adoption in NOx abatement.

As TPC is a public enterprise and protected by a regulated rate of return, it does not care too much about the cost incurred from abatement. The abatement investment is believed to be unnecessary if no external pressure is exerted on TPC that seeks to comply with statutory regulation fully only in general. The negative effect of the 1994 standard for the three pollutants may be caused by TPCs earlier adoption of new technologies in improving air pollution emissions. The nding is opposite to the previous researches that argue that environmental regulation has a positive impact to force the diffusion of new technologies and improves working practices (Kemp 1995). Many researchers have shown that stringent environmental regulation has motivated technology innovation and diffusion for both process improvement and product redesign (e.g., Warren et al. 1999; Kemp 1995). The environmental standards for air emissions specied in the environmental regulations, in general, are based on

existing technology, and often follow the technological development that has already occurred in the industry (Mickwitz et al. 2008). It also happens to Taiwan that the emission standards implemented in Taiwan in general fell behind the developed countries. In other words, the updated stricter environmental standard was set up based on the yesterdays state of the art technology or after new technologies was adopted. This result shows that the regulation of the 1994 Standard becomes increasingly ineffective and even counterproductive in improving pollution control and the related technology innovation. The effect of technology diffusion may be attributed to the anticipation and exibility of regulations with respect to their effects on innovations. In contrast, the mixed policy provides positive impacts on the technology diffusion for NOx, but no evidence nds the connection for TSP and SOx. As the technology for ue gas treatment to remove TSP and SOx is seen as a mature technology, and thus the mixed technology can not improve the innovation. On the contrary, there is still a great room for NOx abatement technology to improve. This result implies that environmental regulation should be renewed stricter to control the output of pollution when the technology supplied outside updates and improve, but the newly tightening requirements have to be foreseeable and credible in order to promote innovations. When the costs comply with the stricter regulation increase, it makes the high price of the new technology and speed up the diffusion.1 This is a possible explanation for the positive effect of mixed policy for NOx. In fact, the reassessment of regulation and the use of economic incentives to attain environmental objectives have been focused (Elcock et al. 2000; Reijnders 2003). The mixed policy may encourage the continued discovery of new clean technology to replace the old process. The pattern and trajectory of innovations are recognized as sector-specic and even country-specic (Lundvall 1992; Niosi et al. 1993), partially determined by explicit and formal knowledge and partially affected by the organizational knowledge and human capital. In practice, technology diffusion results in both expansion and restructuring of knowledge in linking with application (Brown 1981) and thus it is practiced in a very complicated process and interacted with a great number of environmental variables (Molina 1997). In a similar way, the coefcient a3 for capacity is signicant with different signs for the three pollutants. This implies that the size of the plant may affect technology
1

Some researchers argue that economic is not the only reason to motivate rms to renew or adopt technology automatically and cost benet analysis is not the main tool to direct rms to make decision of the adoption of new technology (Mulder et al. 2003; Diederen et al. 2003).

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diffusion but in different direction. In practice, any given technology will be replaced by a newer one eventually with higher efciency (Danaher et al. 2001). The abatement technology in NOx seems to be more difcult than the other two pollutants, and the plant with higher capacity faces more challenge to improve its NOx emissions. The estimated coefcient for explanatory variable x2 t1 is not signicant in the case of TSP and SOx technology diffusion. This result implies that the absorptive capacity2 F is dynamic rather than static for the two kinds of pollutants. In contrast, the estimated coefcient for explanatory variable x2 t1 is signicant for the case of NOx. It seems that the carrying capacity is static for NOx abatement technology but dynamic for TSP and SOx abatement technology. Organizational capabilities may account for the cause of the continual changing carrying capacity. Organizational capabilities refer to a rms characteristics or capabilities to carry out innovation including the level of knowledge and expertise in the specic new technology (Eder 2003). Such expertise ranges from the presence of abilities to purchase the appropriate machinery and equipment to their operation and maintenance, the ability to comply with the environmental change, and the capacity to outsource new knowledge through collaboration with suppliers and end-user involvement, and thus it determines the potential of carrying capacity. Power generation technology (fuel type) may play a very important role in affecting NOx emissions, but the result does not support the relationship of fuel type and TSP or SOxSOx emissions. The efcient way to reduce NOx is to invest abatement facilities, while SOx emissions can be improved by reducing the fairly high sulfur content of the fuels used. The TSP emission can be removed from ue gas through appropriate technologies and thus it does not vary too much among the different type of fuel. Some researchers have mentioned that clean technology plays an important role in supporting environmental sustainability and contributing a large portion to economic

growth and competitiveness (Montalvo 2008; Huhtala 2003). The development, adoption and diffusion of clean technology are a prerequisite to move toward sustainability (e.g., Mickwitz et al. 2008). There are many factors3 in affecting technology levels in addition to environmental policy. It is generally recognized that the intervention of public policy in the form of environmental policy and enforcement of regulations are the major factors to affect technology diffusion at rm level (please see Battisti 2008; Luken and van Rompaey 2008; Langerak et al. 1998). Environmental policy is important for the adoption and diffusion of clean technology, but other factors or environmental variables, such as industry characteristics, plant size, etc., are also important to improve clean technology.

Conclusions The result of this empirical study proves that policy instruments can promote the diffusion of technology and improve the eco-efciency. The results of this article highlight the challenge involved in environmental policies set to promote the diffusion of cleaner technologies and suggest that not only economic incentives improve technology diffusion but also the upgrade of environmental regulations also can affect clean technology diffusion. In brief, the rst contribution of this article is the presentation of a logistic model to describe the pattern of abatement technology improvement that is measured in terms of emitted pollutant concentrations. Technology diffusions are assumed to be caused by knowledge stock built-up and thus they are encouraged by governmental policy, organizational characteristics. The diffusion pattern of technology can provide information for cost benet analysis in management and the new technology also can be introduced. The second contribution of this paper is to test the presented model by applying it to the ue gas emissions from fossil-fuel power plants in Taiwan and concludes that the policy factors and plant characteristics signicantly inuence the technology diffusion in addition to autonomous diffusion. The shifting of emission standards toward stringency might have at least two major effects on the introduction of clean technologies regardless of the nancial implications for generators. As the more and more stringent of future

Absorptive capacity is dened as the organizations ability to search, acquire, and exploit external technology, affected by its characteristics (Cohen and Levinthal 1990). It plays an important role in improving performance (Cohen and Levinthal 1990; AtuaheneGima 1992; Mukherjee et al. 2000; Santangelo 2000) and serves as the foundation for technical learning within an organization (Veugelers and Cassiman 1999). It seems to depend on several factors including communication between the external environment and the rm, as well as organizational and environmental characteristic. For example, R&D and the budget may inuence its absorptive capacity (Kamien and Zang 2000), organizational cultures can facilitate or hinder organizational change or learning and eventually determine the efcacy of technology transfer and absorptive capacity (Montealegre 1999).

3 Montalvo (2006, 2008) classify factors affecting innovations in cleaner technologies into: public policy, economics, markets, communities and social pressure, attitudes and social values, technological opportunities, and technological capabilities and organizational capabilities.

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The policy impact

emission standards are anticipated, investments in clean technology can be earlier. Due to future certainty, the stringency of emission standards can induce more innovative products. Not surprisingly, policy stability has become increasingly important in motivating power plants to invest in clean technology continuously, but the policy impact that has inuenced technology diffusion related to the stringency of emission standards. The producer will not upgrade the technology level when the emission standard is not quite strict and the policy has been anticipated. In brief, the government expects to reduce the emission that the environmental standards have the stringent and unanticipated characteristic. The empirical results are concluded based on the abatement on ue gas from fossil-fuel power generation in Taiwan and thus the presented model may be extended to test on other sectors such as the chemical industry, the steel-making industry, the paper industry, etc. In the mean time, the estimated results form the proposed model may provide an objective for government to set up the emission standards of ue gas. The stringent emission and cost analysis may provide a strong incentive for rms to invest in innovation of clean technology for the reduction of ue gas emission.

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Appendix 1 See Table 6.

Table 6 TSP emission standard Flow rate (Nm3/min) Concentration (mg/Nm3) Standard 1 Below 30 50 100 200 300 500 800 1,000 2,000 3,000 5,000 8,000 10,000 20,000 30,000 50,000 Over 70,000 500 430 350 285 252 217 189 176 144 127 109 95 89 73 55 55 50 Standard 2 500 411 314 241 206 169 141 129 99 85 70 58 53 41 29 29 25

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