Screening green innovation through carbon pricing

Lassi Ahlvik and Inge van den Bijgaart

Journal of Environmental Economics and Management, 2024, vol. 124, issue C

Abstract: Effective climate change mitigation requires green innovation, but not all projects have equal social value. We examine the role of innovation heterogeneity in a model where the policy maker cannot observe innovation quality and directly subsidize the socially most valuable green innovations. We find that carbon pricing works as an innovation screening device; this creates a premium on the optimal carbon price, raising it above the Pigouvian level. We identify conditions for perfect screening and generalize results to screening policies under alternative intellectual property regimes and complementary policies. A calibration reveals that screening can justify a carbon price that is up to three times the Pigouvian price.

Keywords: Carbon pricing; Green innovation; Optimal policy; R&D; Screening (search for similar items in EconPapers)
JEL-codes: H23 O30 Q55 Q58 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Working Paper: Screening Green Innovation through Carbon Pricing (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeeman:v:124:y:2024:i:c:s0095069624000068

DOI: 10.1016/j.jeem.2024.102932

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