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Determinants of Renewable Energy Innovation: Environmental Policies vs. Market Regulation

Francesco Nicolli (), Francesco Vona () and Lionel Nesta ()

No 201204, Working Papers from University of Ferrara, Department of Economics

Abstract: This paper carries out a comprehensive analysis of renewable energy innovations considering four mechanisms suggested by innovation models: 1. policy-inducement; 2. market structure; 3. demand and social cohesion- mainly proxied by income inequality; 4. characteristics of country knowledge base. For OECD countries and years 1970-2005, we build a unique dataset containing time-varying information on quality-adjusted patent production in renewable energy, the latter being a function of environmental policies, green R&D, entry barriers, knowledge stock, knowledge diversity and income inequality. We develop count data models using the Generalized Method of Moments (GMM) to account for endogeneity of policy support. Our synthetic policy index positively affects innovations especially in countries with deregulated energy markets and low entry barriers. The effect of entry barriers and inequality is negative and of similar magnitude as that of policy. Product market liberalization positively affects green patent generation, especially so when ambitious policies are adopted, when the initial level of public R&D expenditures and when the initial share of distributed energy generation is high. Our results are robust to alternative specifications, to the inclusion of technology-specific effects and to the use of quality-adjusted patents as dependent variables. In the latter case, the estimated effect of lowering entry barriers and of knowledge diversity almost double on citation count relatively to patent count.

Keywords: renewable energy technology; patent; environmental policies; product market regulation; inequality (search for similar items in EconPapers)
JEL-codes: Q55 Q58 Q42 Q48 O34 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ene, nep-env and nep-ino
Date: 2012-02-12
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Working Paper: Determinants of Renewable Energy Innovation: environmental policies vs. market regulation (2012) Downloads
Working Paper: Determinants of renewable energy innovation: environmental policies vs. market regulation (2012) Downloads
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