Do Fossil fuel Taxes Promote Innovation in Renewable Electricity Generation?

Itziar Lazkano and Linh Pham

No 16/2016, Discussion Paper Series in Economics from Norwegian School of Economics, Department of Economics

Abstract: We evaluate the role of a fossil fuel tax and research subsidy in directing innovation from fossil fuel toward renewable energy technologies in the electricity sector. Using a global firm-level electricity patent database from 1978 to 2011, we find that the impact of fossil fuel taxes on renewable energy innovation varies with the type of fossil fuel. Specifically, a tax on coal reduces innovation in both fossil fuel and renewable energy technologies while a tax on natural gas has no statistically significant impact on renewable energy innovation. The reason is that easily dispatchable energy sources like coal-fired power plants need to complement renewable energy Technologies in the grid because renewables generate electricity intermittently. Our results suggest that a tax on natural gas, combined with research subsidies for renewable energy, may effectively shift innovation in the electricity sector towards renewable energy. In contrast, coal taxation or a carbon tax that increases coal prices has unintended negative consequences for renewable energy innovation.

Keywords: Electricity; Energy taxes; Renewable; coal; natural gas technologies (search for similar items in EconPapers)
JEL-codes: L90 O30 Q40 (search for similar items in EconPapers)
Pages: 74 pages
Date: 2016-11-16
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 (2)

Downloads: (external link)
https://brage.bibsys.no/xmlui/handle/11250/2423519 (application/pdf)
Our link check indicates that this URL is bad, the error code is: 500 Can't connect to brage.bibsys.no:443 (No such host is known. )

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hhs:nhheco:2016_016

Ordering information: This working paper can be ordered from

Access Statistics for this paper

More papers in Discussion Paper Series in Economics from Norwegian School of Economics, Department of Economics NHH, Department of Economics, Helleveien 30, N-5045 Bergen, Norway. Contact information at EDIRC.
Bibliographic data for series maintained by Karen Reed-Larsen ().