Environmental Policy Choice and the Direction of Innovation

Lionel Nesta (), Elena Verdolini and Francesco Vona
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Lionel Nesta: GREDEG - Groupe de Recherche en Droit, Economie et Gestion - UNS - Université Nice Sophia Antipolis (1965 - 2019) - CNRS - Centre National de la Recherche Scientifique - UniCA - Université Côte d'Azur, UniCA - Université Côte d'Azur, OFCE - Observatoire français des conjonctures économiques (Sciences Po) - Sciences Po - Sciences Po

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Abstract: This paper analyses how policy choice affects the direction of innovation towards renewable and away from fossilfuel energy technologies in a sample of 33 countries between 1990 and 2012. By policy choice, we mean the combination of market-based and command-and-control policy instruments. We develop three competing models of energy innovation -the linear, the interaction and the threshold models -and show that the threshold model is the best fit for the data. We then simulate the direction of innovation over the sample period under various policy scenarios. We show that under the appropriate policy mix, countries can swiftly break out from fossil fuel towards renewable energy innovation.

Keywords: Simulation; Discontinuities; Technological Transition; Policy Instrument Choice; Energy Innovation (search for similar items in EconPapers)
Date: 2025-10
Note: View the original document on HAL open archive server: https://sciencespo.hal.science/hal-05305572v1
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Working Paper: Environmental Policy Choice and the Direction of Innovation (2025)
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