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Directing Technical Change from Fossil-Fuel to Renewable Energy Innovation: An Application using Firm Level Patent Data



This paper investigates the determinants of directed technical change at the Firm level in the electricity generation sector. We use firm-level data on patents filed in renewable (REN) and fossil fuel (FF) technologies by 5,261 european firms over the period 1978-2006. We investigate how energy prices, market size and knowledge stocks affect firms' incentives to innovate in one technology relative to another and how these factors may thereby induce a shift from FF to REN technology in the electricity generation sector. We separately study small specialized firms, which innovate in only one type of technology during our sample period, and large mixed firms, which innovate in both technologies. We also separate the extensive margin innovation decision (i.e. whether to conduct innovation) from the intensive margin decision (i.e. how much to innovate). Overall, we find that all three factors - energy prices, market sizes and past knowledge stocks - matter to redirect innovation towards REN and away from FF technologies. Yet, we find that these factors have a larger impact on closing the technology gap through the entry (and exit) of small specialized firms, rather than through large mixed firms' innovation. An implication of our results is that firm dynamics are of direct policy interest to induce the replacement of FF by REN technologies in the electricity generation sector.

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  • Joelle Noailly & Roger Smeets, 2014. "Directing Technical Change from Fossil-Fuel to Renewable Energy Innovation: An Application using Firm Level Patent Data," CIES Research Paper series 24-2014, Centre for International Environmental Studies, The Graduate Institute.
  • Handle: RePEc:gii:ciesrp:cies_rp_24

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    1. repec:oup:renvpo:v:11:y:2017:i:2:p:183-206. is not listed on IDEAS
    2. Chen, Jiandong & Cheng, Shulei & Song, Malin & Wu, Yinyin, 2016. "A carbon emissions reduction index: Integrating the volume and allocation of regional emissions," Applied Energy, Elsevier, vol. 184(C), pages 1154-1164.
    3. Gregor Semieniuk, 2016. "Fossil energy in economic growth: A study of the energy direction of technical change, 1950-2012," SPRU Working Paper Series 2016-11, SPRU - Science and Technology Policy Research, University of Sussex.
    4. Barbieri, Nicolò, 2016. "Fuel prices and the invention crowding out effect: Releasing the automotive industry from its dependence on fossil fuel," Technological Forecasting and Social Change, Elsevier, vol. 111(C), pages 222-234.
    5. repec:wsi:ijitmx:v:14:y:2017:i:06:n:s0219877017500407 is not listed on IDEAS
    6. Lazkano, Itziar & Pham, Linh, 2016. "Do Fossil fuel Taxes Promote Innovation in Renewable Electricity Generation?," Discussion Paper Series in Economics 16/2016, Norwegian School of Economics, Department of Economics.
    7. Lazkano, Itziar & Nøstbakken, Linda & Pelli, Martino, 2017. "From fossil fuels to renewables: The role of electricity storage," European Economic Review, Elsevier, vol. 99(C), pages 113-129.
    8. Lionel Nesta & Elena Verdolini & Francesco Vona, 2018. "Threshold Policy Effects and Directed Technical Change in Energy Innovation," Documents de Travail de l'OFCE 2018-05, Observatoire Francais des Conjonctures Economiques (OFCE).
    9. Jürgen Kruse & Heike Wetzel, 2016. "Innovation in Clean Coal Technologies: Empirical Evidence from Firm-Level Patent Data," MAGKS Papers on Economics 201615, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
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    11. Clément Bonnet, 2017. "Measuring Inventive Performance with Patent Data: an Application to Low Carbon Energy Technologies," Working Papers 1709, Chaire Economie du climat.
    12. Chang, Rui-Dong & Zuo, Jian & Zhao, Zhen-Yu & Zillante, George & Gan, Xiao-Long & Soebarto, Veronica, 2017. "Evolving theories of sustainability and firms: History, future directions and implications for renewable energy research," Renewable and Sustainable Energy Reviews, Elsevier, vol. 72(C), pages 48-56.
    13. Yoonhwan Oh & Jungsub Yoon & Jeong-Dong Lee, 2016. "Evolutionary Patterns of Renewable Energy Technology Development in East Asia (1990–2010)," Sustainability, MDPI, Open Access Journal, vol. 8(8), pages 1-24, July.
    14. Mare Sarr & Joëlle Noailly, 2017. "Innovation, Diffusion, Growth and the Environment: Taking Stock and Charting New Directions," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 66(3), pages 393-407, March.
    15. Corrado Di Maria & Sjak Smulders & Edwin Werf, 2017. "Climate Policy with Tied Hands: Optimal Resource Taxation Under Implementation Lags," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 66(3), pages 537-551, March.
    16. repec:eee:renene:v:113:y:2017:i:c:p:867-884 is not listed on IDEAS
    17. repec:eee:rensus:v:76:y:2017:i:c:p:105-137 is not listed on IDEAS
    18. Clément Bonnet, 2016. "Measuring Knowledge with Patent Data: an Application to Low Carbon Energy Technologies," EconomiX Working Papers 2016-37, University of Paris Nanterre, EconomiX.
    19. repec:spr:nathaz:v:88:y:2017:i:2:d:10.1007_s11069-017-2915-2 is not listed on IDEAS

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    Directed technical change; Renewable energy; Fossil fuel energy; Patents; Innovation; Firm dynamics;

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