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The impact of energy prices on product innovation: Evidence from the UK refrigerator market

Author

Listed:
  • François Cohen
  • Matthieu Glachant
  • Magnus Söderberg

Abstract

This paper uses product-level data from the UK refrigerator market to evaluate the impact of electricity prices on product innovation. Our best estimate is that a 10% increase in the electricity price reduces the average energy consumption of commercialized refrigerator models by 2%. A large share of this reduction is explained by a reduction of freezing space. We also show that the exit of energy-inefficient products contributes more to energy reduction than the launch of new energy-efficient models. These findings suggest that innovation – the development of better technologies embodied in new products – does not respond strongly to energy price variations.

Suggested Citation

  • François Cohen & Matthieu Glachant & Magnus Söderberg, 2017. "The impact of energy prices on product innovation: Evidence from the UK refrigerator market," CIES Research Paper series 50-2017, Centre for International Environmental Studies, The Graduate Institute.
    • Handle: RePEc:gii:ciesrp:cies_rp_51
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    References listed on IDEAS

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    1. Kenneth Gillingham & Karen Palmer, 2014. "Bridging the Energy Efficiency Gap: Policy Insights from Economic Theory and Empirical Evidence," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 8(1), pages 18-38, January.
    2. Joseph M. Crabb & Daniel K.N. Johnson, 2010. "Fueling Innovation: The Impact of Oil Prices and CAFE Standards on Energy-Efficient Automotive Technology," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 199-216.
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    7. Philippe Aghion & Antoine Dechezleprêtre & David Hémous & Ralf Martin & John Van Reenen, 2016. "Carbon Taxes, Path Dependency, and Directed Technical Change: Evidence from the Auto Industry," Journal of Political Economy, University of Chicago Press, vol. 124(1), pages 1-51.
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    11. Popp, David & Newell, Richard G. & Jaffe, Adam B., 2010. "Energy, the Environment, and Technological Change," Handbook of the Economics of Innovation, in: Bronwyn H. Hall & Nathan Rosenberg (ed.),Handbook of the Economics of Innovation, edition 1, volume 2, chapter 0, pages 873-937, Elsevier.
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    13. Kelvin J. Lancaster, 1966. "A New Approach to Consumer Theory," Journal of Political Economy, University of Chicago Press, vol. 74, pages 132-132.
    14. David Popp, 2002. "Induced Innovation and Energy Prices," American Economic Review, American Economic Association, vol. 92(1), pages 160-180, March.
    15. Cohen, François & Glachant, Matthieu & Söderberg, Magnus, 2017. "Consumer myopia, imperfect competition and the energy efficiency gap: Evidence from the UK refrigerator market," European Economic Review, Elsevier, vol. 93(C), pages 1-23.
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    Citations

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    Cited by:

    1. Lin, Boqiang & Chen, Yufang, 2019. "Does electricity price matter for innovation in renewable energy technologies in China?," Energy Economics, Elsevier, vol. 78(C), pages 259-266.
    2. Francois Cohen & Giulia Valacchi, 2017. "Do firms innovate if they can relocate? Evidence from te steel industry," CIES Research Paper series 55-2017, Centre for International Environmental Studies, The Graduate Institute.
    3. Francois Cohen & Giulia Valacchi, 2017. "The Heterogeneous Impact of Coal Prices on the Location of Dirty and Clean Steel Plants," CIES Research Paper series 55-2017, Centre for International Environmental Studies, The Graduate Institute.

    More about this item

    Keywords

    Induced Innovation; Energy Efficiency; Electricity Prices; Multiple Imputations; Product entry and exit.;

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • L68 - Industrial Organization - - Industry Studies: Manufacturing - - - Appliances; Furniture; Other Consumer Durables
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation

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