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EU Emissions Trading: Policy-Induced Innovation, or Business as Usual? Findings from Company Case Studies in the Republic of Croatia

Martin Larsson ()
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Martin Larsson: The Institute of Economics, Zagreb

No 1705, Working Papers from The Institute of Economics, Zagreb

Abstract: The European Union Emissions Trading Scheme (EU ETS), while primarily designed to reduce greenhouse gas emissions in an effective and efficient way, is supposed to serve as an instrument promoting investments in clean, low-carbon technologies by way of incentivizing associated innovation activity. Since empirical results concerning the instrument´s capacity of reaching this secondary policy goal are rare, this paper examines the innovation impact of the EU ETS among emissions-intensive companies in the Republic of Croatia. To this end the effects of the instrument on research, development and demonstration (RD&D), adoption, and organizational change are examined. The study accounts for the impacts of various context factors, including firm-external and firm-internal variables. The empirical analysis employs a multiple case study approach. While findings support the assertion that policy-induced innovation effects arise from the pricing of carbon, the innovation-fostering capacity of the instrument remains limited due to continued low levels of policy stringency and predictability. Long-term expectations of market actors appear to play a decisive role in decisions surrounding innovation activity, suggesting that signals of policy commitment are highly influential.

Keywords: European Union; emissions trading; Croatia; carbon; climate policy (search for similar items in EconPapers)
JEL-codes: O31 Q58 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ene, nep-env, nep-ino and nep-reg
Date: 2017-10
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