Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/174970 
Authors: 
Year of Publication: 
2018
Series/Report no.: 
CESifo Working Paper No. 6847
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
Environmental regulations have consistently been found to spur innovation in ‘clean’ technologies, with one significant exception. Past cap-and-trade programs have encouraged adoption of existing pollution control technologies, but had little effect on innovation. Several explanations have been offered, including secondary market failures and a lack of polluter sophistication. In this paper I argue that it likely has more to do with the state of the technologies. Using a newly constructed panel of British companies, I show that the European carbon market - the world’s largest cap-and-trade program - has, contrary to past experience, encouraged innovation rather than adoption. I discuss how these contrasting findings can be reconciled, and the implications for planned reforms.
Subjects: 
EU emissions trading system
induced innovation
directed technological change
technology diffusion
JEL: 
O30
Q55
Q58
Document Type: 
Working Paper
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