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Adopt or innovate: understanding technological responses to cap-and-trade

Raphael Calel

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

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: D21 O32 O34 Q52 Q54 Q58 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2020-08-03
New Economics Papers: this item is included in nep-ene, nep-env, nep-reg and nep-tid
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Citations: View citations in EconPapers (3) Track citations by RSS feed

Published in American Economic Journal: Economic Policy, 3, August, 2020, 12(3), pp. 170-201. ISSN: 1945-7731

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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:106257

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