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Directing technical change from fossil-fuel to renewable energy innovation: An application using firm-level patent data

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  • Noailly, Joëlle
  • Smeets, Roger

Abstract

In this paper we provide an analysis of directed technical change in the sector of electricity generation. We rely on patent data in fossil-fuel (FF) and renewable energy (REN) technologies for 5471 European firms over the 1978–2006 period. The novelty of our approach is in the focus on firm׳s heterogeneity in driving technological change. We make a distinction between small specialized firms, which innovate in only one type of technology, and large mixed firms, which innovate in both technologies, to analyse how REN patents can replace FF ones at the sector level both through a shift in innovation activities within existing firms and through firms׳ entry and exit. We use zero-inflated count data estimation techniques to identify the factors that affect specialized versus mixed firms׳ patenting behaviour both at the intensive (i.e., levels of innovation) and extensive (i.e., technological entry) margins. We further investigate the implications of our firm-level estimations for reducing the gap between REN and FF innovation at the aggregate level. We establish two key findings: (1) a decrease in the FF-REN technology gap mainly comes about through technological entry of specialized REN firms following an increase in REN market size; (2) increases in FF prices, FF market size, and FF knowledge stocks all increase the technology gap by increasing mixed firms FF innovation rates. An important implication of our results is that policies aimed at increasing REN innovation should focus on helping small firms to start and sustain innovation in the long-run.

Suggested Citation

  • Noailly, Joëlle & Smeets, Roger, 2015. "Directing technical change from fossil-fuel to renewable energy innovation: An application using firm-level patent data," Journal of Environmental Economics and Management, Elsevier, vol. 72(C), pages 15-37.
  • Handle: RePEc:eee:jeeman:v:72:y:2015:i:c:p:15-37
    DOI: 10.1016/j.jeem.2015.03.004
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    1. repec:eee:enepol:v:115:y:2018:i:c:p:353-365 is not listed on IDEAS
    2. Lazkano, Itziar & Nøstbakken, Linda & Pelli, Martino, 2017. "From fossil fuels to renewables: The role of electricity storage," European Economic Review, Elsevier, vol. 99(C), pages 113-129.
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    4. Chen, Jiandong & Cheng, Shulei & Song, Malin & Wu, Yinyin, 2016. "A carbon emissions reduction index: Integrating the volume and allocation of regional emissions," Applied Energy, Elsevier, vol. 184(C), pages 1154-1164.
    5. Gregor Semieniuk, 2016. "Fossil energy in economic growth: A study of the energy direction of technical change, 1950-2012," SPRU Working Paper Series 2016-11, SPRU - Science and Technology Policy Research, University of Sussex.
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    8. repec:wsi:ijitmx:v:14:y:2017:i:06:n:s0219877017500407 is not listed on IDEAS
    9. Clément Bonnet, 2017. "Measuring Inventive Performance with Patent Data: an Application to Low Carbon Energy Technologies," Working Papers 1709, Chaire Economie du climat.
    10. Chang, Rui-Dong & Zuo, Jian & Zhao, Zhen-Yu & Zillante, George & Gan, Xiao-Long & Soebarto, Veronica, 2017. "Evolving theories of sustainability and firms: History, future directions and implications for renewable energy research," Renewable and Sustainable Energy Reviews, Elsevier, vol. 72(C), pages 48-56.
    11. Yoonhwan Oh & Jungsub Yoon & Jeong-Dong Lee, 2016. "Evolutionary Patterns of Renewable Energy Technology Development in East Asia (1990–2010)," Sustainability, MDPI, Open Access Journal, vol. 8(8), pages 1-24, July.
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    14. Corrado Di Maria & Sjak Smulders & Edwin Werf, 2017. "Climate Policy with Tied Hands: Optimal Resource Taxation Under Implementation Lags," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 66(3), pages 537-551, March.
    15. Jürgen Kruse & Heike Wetzel, 2016. "Innovation in Clean Coal Technologies: Empirical Evidence from Firm-Level Patent Data," MAGKS Papers on Economics 201615, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    16. repec:eee:renene:v:113:y:2017:i:c:p:867-884 is not listed on IDEAS
    17. repec:eee:rensus:v:76:y:2017:i:c:p:105-137 is not listed on IDEAS
    18. Clément Bonnet, 2016. "Measuring Knowledge with Patent Data: an Application to Low Carbon Energy Technologies," EconomiX Working Papers 2016-37, University of Paris Nanterre, EconomiX.
    19. Nyga-Łukaszewska Honorata, 2016. "Selected Issues in Innovation in the Energy Industry. The Case of Poland," International Journal of Management and Economics, De Gruyter Open, vol. 50(1), pages 100-112, June.
    20. repec:spr:nathaz:v:88:y:2017:i:2:d:10.1007_s11069-017-2915-2 is not listed on IDEAS

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