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Threshold Policy Effects and Directed Technical Change in Energy Innovation

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  • Nesta, Lionel
  • Verdolini, Elena
  • Vona, Francesco

Abstract

This paper analyzes the effect of environmental policies on the direction of energy innovation across countries over the period 1990-2012. Our novelty is to use threshold regression models to allow for discontinuities in policy effectiveness depending on a country's relative competencies in renewable and fossil fuel technologies. We show that the dynamic incentives of environmental policies become effective just above the median level of relative competencies. In this critical second regime, market-based policies are moderately effective in promoting renewable innovation, while command-and-control policies depress fossil based innovation. Finally, market-based policies are more effective to consolidate a green comparative advantage in the last regime. We illustrate how our approach can be used for policy design in laggard countries.

Suggested Citation

  • Nesta, Lionel & Verdolini, Elena & Vona, Francesco, 2018. "Threshold Policy Effects and Directed Technical Change in Energy Innovation," CSI: Climate and Sustainable Innovation 268731, Fondazione Eni Enrico Mattei (FEEM).
    • Handle: RePEc:ags:feemci:268731
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    References listed on IDEAS

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    Cited by:

    1. Savona, Maria & Ciarli, Tommaso, 2019. "Structural Changes and Sustainability. A Selected Review of the Empirical Evidence," Ecological Economics, Elsevier, vol. 159(C), pages 244-260.
    2. Nicolli, Francesco & Vona, Francesco, 2019. "Energy market liberalization and renewable energy policies in OECD countries," Energy Policy, Elsevier, vol. 128(C), pages 853-867.

    More about this item

    Keywords

    Research and Development/Tech Change/Emerging Technologies;

    JEL classification:

    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
    • Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital

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