Adopt or Innovate: Understanding Technological Responses to Cap-and-Trade

Raphael Calel

American Economic Journal: Economic Policy, 2020, vol. 12, issue 3, 170-201

Abstract: One important motivation for creating cap-and-trade programs for carbon emissions is the expectation that they will stimulate much-needed low-carbon innovation. I construct a new panel of British firms to investigate this hypothesis, finding that the European carbon market has encouraged greater low-carbon patenting and R&D spending among regulated firms without necessarily driving short-term reductions in carbon intensity of output. This stands in contrast to past cap-and-trade programs, which have primarily spurred adoption of existing pollution control technologies, with little effect on innovation. I discuss how to reconcile these contrasting findings and implications for the future of carbon markets.

JEL-codes: D22 O32 O34 Q52 Q54 Q58 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (71)

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Related works:
Working Paper: Adopt or innovate: understanding technological responses to cap-and-trade (2020)
Working Paper: Adopt or Innovate: Understanding Technological Responses to Cap-and-Trade (2018)
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DOI: 10.1257/pol.20180135

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