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Explaining the Slow Pace of Energy Technological Innovation: Why Market Conditions Matter

Wei Jin and ZhongXiang Zhang ()
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Wei Jin: Zhejiang University

CCEP Working Papers from Centre for Climate Economics & Policy, Crawford School of Public Policy, The Australian National University

Abstract: As a useful complement to numerous innovation policy studies from a normative perspective, this paper provides a positive framework to analyze the basic economic mechanism of energy technological innovation and explain its slow pace of technological progress. We find that the capital-intensiveness of energy technology is an inhibiting factor to catalyze market size effect and slows innovations and diffusions of energy technology in the market. We also show that the substantial homogeneity of energy products leads to both a monopolistic market structure on the supply side and a weak level of positive pecuniary externality on the demand side, both dampening the incentive of innovation. On the basis of our economic analysis, we recommend that a package of policy responses to accelerating energy innovation should include 1) downsizing "heavy" assets of energy technologies; 2) deregulating monopolistic energy-supplying markets; and 3) differentiating the homogenous energy products.

Keywords: The Economics of Technological Innovation; Market Size Effect; Love-for-variety effect; Energy Technology; IT Technology (search for similar items in EconPapers)
JEL-codes: Q55 Q58 Q43 Q48 O31 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ene and nep-ino
Date: 2014-01
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Working Paper: Explaining the Slow Pace of Energy Technological Innovation: Why Market Conditions Matter (2014) Downloads
Working Paper: Explaining the Slow Pace of Energy Technological Innovation Why Market Conditions Matter? (2014) Downloads
Working Paper: Explaining the Slow Pace of Energy Technological Innovation: Why Market Conditions Matter? (2014) Downloads
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