Extracting the Kyoto Rents: Nitrogen Efficient GMO Rice in China

This paper investigates the market potential for a new technology such as a genetically modified crop, which produces both a private and a public good. A theoretical framework is developed, based on vertically differentiated products and heterogeneous producer returns. Our setting corresponds to a system composed of a biotech firm, individual farm, consumer and the government. We claim that coordination among every single stage of the system is needed in order for the adoption process to be successful and beneficial to all those involved. Our results indicate that the market adaption of a genetically modified product depends on the magnitude effect of the new technology on the incremental savings and costs as well as consumers’ aversion and the carbon emission market price. In particular we consider the carbon emissions market as an important instrument associated with the reduction of the two negative parameters of production costs and consumers aversion..