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Threshold Policy Effects and Directed Technical Change in Energy Innovation

Author

Listed:
  • Lionel Nesta

    (Université Côte d'Azur, CNRS, Gredeg, OFCE SciencesPo and SKEMA Business School)

  • Elena Verdolini

    (FEEM and CMCC)

  • Francesco Vona

    (OFCE SciencesPo, SKEMA Business School and Université Côte d'Azur (GREDEG))

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

  • Lionel Nesta & Elena Verdolini & Francesco Vona, 2018. "Threshold Policy Effects and Directed Technical Change in Energy Innovation," Working Papers 2018.04, Fondazione Eni Enrico Mattei.
  • Handle: RePEc:fem:femwpa:2018.04
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    References listed on IDEAS

    as
    1. Verdolini, Elena & Galeotti, Marzio, 2011. "At home and abroad: An empirical analysis of innovation and diffusion in energy technologies," Journal of Environmental Economics and Management, Elsevier, vol. 61(2), pages 119-134, March.
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    More about this item

    Keywords

    Directed Technical Change; Threshold Models; Environmental Policies; Policy Mix;

    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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