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Environmental Policy and Technical Change: A Survey

Author

Listed:
  • Carraro, Carlo
  • De Cian, Enrica
  • Nicita, Lea
  • Massetti, Emanuele
  • Verdolini, Elena

Abstract

In this survey we review the literature that studies the relationship between environmental policy and technical change. We divide the literature in two broad areas of research. First, we look at the studies that evaluate the impact of environmental regulation on technological change after the implementation of environmental policy ( ex-post ). Second, we introduce the studies that assess the impact of environmental regulation on innovation dynamics before the implementation of environmental policy ( ex-ante ). While the first group is dominated by econometric work, in the second group we find the fast growing literature based on Integrated Assessment Models (IAMs) created to study the policies to limit global warming. Both ex-post and ex-ante studies corroborate the hypothesis that environmental policy plays an important role in inducing innovation and in increasing the adoption as well as the diffusion of new technologies. Policy experiments carried out using Integrated Assessment Models highlight that the size and the direction of the inducement effect depend on at least three elements. First, relative prices play an important role, but also scale and market size effects are relevant in shaping incentives to innovate. Second, the inducement effect can vary across different R&D programs and with the degree of policy stringency. Third, nearly all studies stress the role of substitution in terms of flexibility, either within the energy sector, between energy and other inputs such as labour or capital, or between final sectors with different energy intensities. A relevant lesson that should be communicated to policy makers is the importance of combining efficiently policies to address the environmental and the knowledge externalities. Areas in which there is room for more research are mentioned throughout the survey. They include the need of exploiting better cross-country dimension of recent panel data sets, launching a new comprehensive assessment of the determinants of eco-friendly innovation in developing countries, assessing the interactions between "clean" and "dirty" R&D, testing whether firms are operating at the frontier of efficiency or not.

Suggested Citation

  • Carraro, Carlo & De Cian, Enrica & Nicita, Lea & Massetti, Emanuele & Verdolini, Elena, 2010. "Environmental Policy and Technical Change: A Survey," International Review of Environmental and Resource Economics, now publishers, vol. 4(2), pages 163-219, October.
  • Handle: RePEc:now:jirere:101.00000033
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    File URL: http://dx.doi.org/10.1561/101.00000033
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    Cited by:

    1. Enrica De Cian & Ilkka Keppo & Johannes Bollen & Samuel Carrara & Hannah Förster & Michael Hübler & Amit Kanudia & Sergey Paltsev & Ronald D. Sands & Katja Schumacher, 2013. "European-Led Climate Policy Versus Global Mitigation Action: Implications On Trade, Technology, And Energy," Climate Change Economics (CCE), World Scientific Publishing Co. Pte. Ltd., vol. 4(supp0), pages 1-28.
    2. Tonghui Lian & Tingyu Ma & Jie Cao & You Wu, 2016. "The effects of environmental regulation on the industrial location of China’s manufacturing," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 80(2), pages 1381-1403, January.
    3. Shouro Dasgupta, Shouro & De Cian, Enrica & Verdolini, Elena, 2016. "The Political Economy of Energy Innovation," MITP: Mitigation, Innovation,and Transformation Pathways 234939, Fondazione Eni Enrico Mattei (FEEM).
    4. Rammer, Christian & Schubert, Torben & Hünermund, Paul & Köhler, Mila & Iferd, Younes & Peters, Bettina, 2016. "Dokumentation zur Innovationserhebung 2015," ZEW Dokumentationen 16-01, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    5. Duch-Brown, Néstor & Costa-Campi, María Teresa, 2015. "The diffusion of patented oil and gas technology with environmental uses: A forward patent citation analysis," Energy Policy, Elsevier, vol. 83(C), pages 267-276.
    6. Allan, Corey & Jaffe, Adam B. & Sin, Isabelle, 2014. "Diffusion of Green Technology: A Survey," International Review of Environmental and Resource Economics, now publishers, vol. 7(1), pages 1-33, April.
    7. Dasgupta, Shouro & De Cian, Enrica, 2016. "Institutions and the Environment: Existing Evidence and Future Directions," MITP: Mitigation, Innovation,and Transformation Pathways 240747, Fondazione Eni Enrico Mattei (FEEM).
    8. Claudio Baccianti & Andreas Löschel, 2014. "The Role of Product and Process Innovation in CGE Models of Environmental Policy," WWWforEurope Working Papers series 68, WWWforEurope.
    9. repec:eee:respol:v:47:y:2018:i:6:p:1018-1031 is not listed on IDEAS
    10. Valentina Bosetti & Enrica De Cian, 2013. "A Good Opening: The Key to Make the Most of Unilateral Climate Action," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 56(2), pages 255-276, October.
    11. Behrens, Vanessa & Berger, Marius & Hud, Martin & Hünermund, Paul & Iferd, Younes & Peters, Bettina & Rammer, Christian & Schubert, Torben, 2017. "Innovation activities of firms in Germany - Results of the German CIS 2012 and 2014: Background report on the surveys of the Mannheim Innovation Panel Conducted in the Years 2013 to 2016," ZEW Dokumentationen 17-04, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    12. Enrica Cian & Valentina Bosetti & Massimo Tavoni, 2012. "Technology innovation and diffusion in “less than ideal” climate policies: An assessment with the WITCH model," Climatic Change, Springer, vol. 114(1), pages 121-143, September.
    13. Angelo Antoci & Simone Borghesi & Mauro Sodini, 2012. "ETS and Technological Innovation: A Random Matching Model," Working Papers 2012.79, Fondazione Eni Enrico Mattei.
    14. Tonghui Lian & Tingyu Ma & Jie Cao & You Wu, 2016. "The effects of environmental regulation on the industrial location of China’s manufacturing," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 80(2), pages 1381-1403, January.
    15. Giulio Cainelli & Massimiliano Mazzanti & Simone Borghesi, 2012. "The European Emission Trading Scheme and environmental innovation diffusion: Empirical analyses using Italian CIS data," Working Papers 201201, University of Ferrara, Department of Economics.
    16. Marcucci, Adriana & Turton, Hal, 2015. "Induced technological change in moderate and fragmented climate change mitigation regimes," Technological Forecasting and Social Change, Elsevier, vol. 90(PA), pages 230-242.
    17. Bonilla, Jorge & Coria, Jessica & Mohlin, Kristina & Sterner, Thomas, 2015. "Refunded emission payments and diffusion of NOx abatement technologies in Sweden," Ecological Economics, Elsevier, vol. 116(C), pages 132-145.
    18. Simone Borghesi & Giulio Cainelli & Massimiliano Mazzanti, 2012. "Brown Sunsets and Green Dawns in the Industrial Sector: Environmental Innovations, Firm Behavior and the European Emission Trading," Working Papers 2012.03, Fondazione Eni Enrico Mattei.

    More about this item

    Keywords

    Technological innovation; Technological diffusion; Endogenous technical change; Induced technical change; Environmental policy; Climate policy;

    JEL classification:

    • Q21 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Demand and Supply; Prices
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy

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