Innovation (policy) and the climate turn

Till Requate

Chapter 11 in The New Role of the State for Transformative Innovation, 2026, pp 179-193 from Edward Elgar Publishing

Abstract: This chapter summarizes the theoretical literature on innovation incentives provided by environmental policies, in particular emission taxes and tradable permits. It argues that, in general, price-based instruments are superior to command-and-control policies, and that, in particular, emissions taxes provide stronger incentives for technology adoption and innovation than emissions permits, unless the supply of permits declines sharply over time. Research and development (R&D) subsidies need to complement environmental policies to take account of R&D spillovers. The chapter also emphasizes that complementary redistributive policies are needed to mitigate social disruption. It also discusses dynamic issues of pricing instruments as greenhouse gases accumulate. Finally, it discusses the new role of government in actively redirecting technological progress from fossil fuel-based technologies to renewable energy and other low-carbon technologies. This implies that governments need to monitor the maturity of new technologies and their rate of progress, and adjust the level of policy instruments accordingly.

Keywords: Environmental Policy Instruments; Emission Taxes; Tradable Emission Permits; R&D Subsidies; Direction of Technological Change (search for similar items in EconPapers)
Date: 2026
ISBN: 9781839100253
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