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Cap-and-Innovate: Evidence of regulation-induced innovation in California

Vanessa da Cruz ()
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Vanessa da Cruz: CER-ETH Centre of Economic Research at ETH Zurich, Switzerland

No 22/377, CER-ETH Economics working paper series from CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich

Abstract: The paper applies the synthetic control method to examine the effects of California’s Cap-and-Trade Program on environmental innovation. The analysis exploits the International Patent Classification system to identify patents relating to environmentally sound technologies. This enables the study to focus on the effects of the policy intervention on green patent filings. A counterfactual is constructed by the combination of other states in the US which allows the comparison of patent applications in California to the estimated counterfactual situation in the absence of a Cap-and-Trade program. The study finds that the number of patents related to green technologies increased by approximately 22.5% after the passing of the Cap-and-Trade regulation. This result is robust to alternative specifications of the synthetic control method.

Keywords: Induced Innovation; Environmental Policy; Climate Change; California Cap-and-Trade Program (search for similar items in EconPapers)
JEL-codes: O31 O38 Q55 Q58 (search for similar items in EconPapers)
Pages: 46 pages
Date: 2022-12
New Economics Papers: this item is included in nep-ene, nep-env, nep-ino, nep-reg, nep-res and nep-tid
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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