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Charging the Transition: Directed Technical Change with Enabling Technologies

Author

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  • Maria Alsina-Pujols
  • Isabel Hovdahl

Abstract

We study how complementarity reshapes innovation incentives and the effectiveness of policies aimed at directing technological transitions. By incorporating energy storage into a macro-climate model, we show that when this enabling technology lags behind renewables, advances in renewable technology can paradoxically reduce incentives for clean innovation. We analytically characterize this novel indirect path dependency effect, which provides a new explanation for the post-2010 collapse in renewable patenting. Calibrated to the U.S. economy, we find that omitting storage overestimates climate policy effectiveness, optimal policy should prioritize storage over renewables, and halving the storage productivity gap increases annual welfare by 1%.

Suggested Citation

  • Maria Alsina-Pujols & Isabel Hovdahl, 2026. "Charging the Transition: Directed Technical Change with Enabling Technologies," CESifo Working Paper Series 12664, CESifo.
    • Handle: RePEc:ces:ceswps:_12664
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    References listed on IDEAS

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    1. Jo, Ara & Miftakhova, Alena, 2024. "How constant is constant elasticity of substitution? Endogenous substitution between clean and dirty energy," Journal of Environmental Economics and Management, Elsevier, vol. 125(C).
    2. Luis E. Gonzales & Koichiro Ito & Mar Reguant, 2023. "The Investment Effects of Market Integration: Evidence From Renewable Energy Expansion in Chile," Econometrica, Econometric Society, vol. 91(5), pages 1659-1693, September.
    3. Chris Papageorgiou & Marianne Saam & Patrick Schulte, 2017. "Substitution between Clean and Dirty Energy Inputs: A Macroeconomic Perspective," The Review of Economics and Statistics, MIT Press, vol. 99(2), pages 281-290, May.
    4. Goulder, Lawrence H. & Mathai, Koshy, 2000. "Optimal CO2 Abatement in the Presence of Induced Technological Change," Journal of Environmental Economics and Management, Elsevier, vol. 39(1), pages 1-38, January.
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    Keywords

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    JEL classification:

    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O44 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Environment and Growth
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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