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Environmental policy and directed technological change: evidence from the European carbon market

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  • Calel, Raphael
  • Dechezlepretre, Antoine

Abstract

This paper investigates the impact of the European Union Emissions Trading System (EU ETS) on technological change, exploiting installations-level inclusion criteria to estimate the System's causal impact on firms' patenting. We find that the EU ETS has increased low-carbon innovation among regulated firms by as much as 10%, while not crowding out patenting for other technologies. We also find evidence that the EU ETS has not impacted patenting beyond the set of regulated companies. These results imply that the EU ETS accounts for nearly a 1% increase in European low-carbon patenting compared to a counterfactual scenario.

Suggested Citation

  • Calel, Raphael & Dechezlepretre, Antoine, 2016. "Environmental policy and directed technological change: evidence from the European carbon market," LSE Research Online Documents on Economics 62723, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:62723
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    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights
    • Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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