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Certificate Oversupply in the European Union Emission Trading System and its Impact on Technological Change

Germà Bel () and Stephan Joseph ()
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Stephan Joseph: Faculty of Economics, University of Barcelona

No 201520, IREA Working Papers from University of Barcelona, Research Institute of Applied Economics

Abstract: We examine the number of patent applications for climate change mitigation technologies (CCMT) filed at the European Patent Office and seek to relate it to the oversupply of emission allowances under the European Union Emission Trading System (EU ETS). We use a panel count data approach to show that firms covered by the policy take the oversupply into account when determining their level of innovative activity. We also indirectly demonstrate that the “weak” version of the Porter hypothesis holds for the EU ETS, given the sizable oversupply of allowances in the market. Our results suggest that in order to set the European economy firmly on the low-carbon technology pathway, and to ensure that the ambitious EU climate targets are met, serious policy changes must be undertaken.

Keywords: Environmental Policy; Emission Trading System; Certificate Oversupply; Technological Change; Patent Count Data JEL classification: Q55; Q58; O33; O38 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-agr, nep-ene, nep-env, nep-eur and nep-ino
Date: 2015-09, Revised 2015-09
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