The effects of climate policy on the rate and direction of innovation: a survey of the EU ETS and the electricity sector

By Tobias S. Schmidt, Malte H. G. Schneider, Karoline S. Rogge, Martin J. A. Schuetz, V. H. Hoffmann. 2012

201 citations recorded by the source corpus.

This article aims to empirically assess the impact of climate policy on technological change—a core objective of climate policy—by focussing on the changes it causes in the rate and direction of corporate innovation activities. To this end, we develop a cross-sectional framework based on concepts from evolutionary economics and organizational theory and, resting upon this framework, develop a set of hypotheses. We test these hypotheses using novel survey data on the electricity sector in seven EU countries. We find that the EU emission trading system (ETS) has limited and even controversial effects, and that long-term emission reduction targets are an important determinant of corporate innovation activities. Furthermore, technology policies emerge as an important element of the policy mix complementing climate policy. Based on our findings in this study, we make recommendations for policy makers on how to improve the existing policy mix.

Subfields: Economics and Econometrics, Management Science and Operations Research

View Paper: https://www.semanticscholar.org/paper/09b49eedb5057df79f40cf6bb5484616794d3014

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Citations in the corpus

The two faces of market support—How deployment policies affect technological exploration and exploitation in the solar photovoltaic industry (2013, background): “…policy usually focuses on the firms directly affected by the regulation (e.g. for pollution control) rather than those supplying the required environmental technologies, for which deployment policies stimulate product sales and may create incentives for innovation (Schmidt et al., 2012).”
The need for comprehensive and well targeted instrument mixes to stimulate energy transitions: The case of energy efficiency policy (2017, unknown): “…most studied from a policy mix perspective (Cunningham et al. 2013), with a main focus on emissions trading schemes and renewable energy policies (e.g. del Rio 2014; Schmidt et al. 2012; Sorrell and Sijm 2003) and, to a lesser extent, energy efficiency (Kern et al. 2017; Rosenow et al. 2016a).”
The effect of carbon pricing on technological change for full energy decarbonization: A review of empirical ex‐post evidence (2020, background): “Schmidt et al. (2012) studied the effect of ETS on the rate and direction of corporate innovation activities through regression analysis for the electricity sector in seven EU countries.”
Demand-pull and technology-push public support for eco-innovation: The case of the biofuels sector (2015, background): “In parallel, since innovation processes need investments, market incentives are important when creating favorable investment conditions for firms (Schmookler, 1966).”
A review and probabilistic model of lifecycle costs of stationary batteries in multiple applications (2013, background): “In order to cope with a rising electricity demand while also attempting to mitigate climate change, many governments have begun to introduce ambitious targets and incentives for the diffusion of renewable power generation technologies [1–4].”
The open eco-innovation mode. An empirical investigation of eleven European countries (2015, methodology): “In the case of techological innovations, this has actually been found (Laursen and alter, 2006) and explained by drawing on the attention-based theries of the firm (Simon, 1947; Koput, 1997; Ocasio, 1997).”
Exploring the role of phase-out policies for low-carbon energy transitions: the case of the German Energiewende (2017, unknown): “However, it has been increasingly argued that these market-based approaches have not been su ﬃ cient in promoting energy transitions at the rates necessary to meet ambitious climate change targets [61 – 63].”
The multiple roles of state investment banks in low-carbon energy finance: An analysis of Australia, the UK and Germany (2018, background): “The development and deployment of new technology, especially of renewable energy and energy efficiency technology is considered key to this transition and so there is a need for policy to speed-up and redirect this technological change (Pizer and Popp, 2008; Schmidt et al., 2012).”
How do policies mobilize private finance for renewable energy?—A systematic review with an investor perspective (2019, background): “[78] even found a perverse effect of ETS in inducing more coal rather than RE investment due to free allocations of emission certificates (grandfathering).”
Policy mixes for sustainability transitions: An extended concept and framework for analysis (2016, background): “Regarding the instruments in this mix it may be useful to distinguish between core (or cornerstone) instruments and complementary (or supplementary) instruments of an instrument mix (IEA, 2011b; Matthes, 2010; Schmidt et al., 2012b).”
Harnessing theories of the policy process for analysing the politics of sustainability transitions: A critical survey (2017, background): “First, directing innovation towards sustainability requires greater analytical attention to credible long-term policy strategies with stable and ambitious targets (Weber and Rohracher 2012; Rogge et al., 2011; Schmidt et al., 2012), such as the recent Paris Agreement (Kern and Rogge, 2016).”
Carbon pricing in climate policy: seven reasons, complementary instruments, and political economy considerations (2017, result): “Another study provides additional evidence on the innovation effects of EU-ETS.(14) Both confirm the results of an earlier patent-based study that energy prices have the largest inducement effect on energyrelated innovations.”