Do market-based instruments really induce more environmental R&D? A test using US panel data
National governments are considering increasing spending on greenhouse gas mitigation R&D by billions of dollars per year at a time when many nations face severe fiscal austerity. This study investigates empirically whether it is realistic to expect market-based environmental policy instruments to stimulate a lot of environmental R&D spending on their own. The hypothesis developed is that increasingly market-based forms of environmental regulation might bring a conditional reduction in the level of environmental R&D spending, all else being equal; and that increasingly market-based approaches to climate mitigation policy may not necessarily induce the large amounts of environmental R&D spending that some corners of the induced innovation literature might predict. The hypothesis is tested using panel data on environmental R&D spending for 30 industry groups over 22 years. The evidence suggests the degree to which the prevailing policy regime embraced market forces may have diminished the R&D-motivating effect of the environmental regulatory burden. This implies that the quest to raise environmental R&D spending may be a good thing in its own right, and that the quest to incorporate market principles and institutions into environmental policy design may also be a good thing, but that market-based policies may undermine the incentives that firms have to invest in environmental R&D.
|Date of creation:||Nov 2012|
|Date of revision:|
|Contact details of provider:|| Postal: Houghton Street, London WC2A 2AE|
Phone: +44 (020) 7405 7686
Web page: http://www.lse.ac.uk/grantham.
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Adam B. Jaffe & Karen Palmer, 1997.
"Environmental Regulation And Innovation: A Panel Data Study,"
The Review of Economics and Statistics,
MIT Press, vol. 79(4), pages 610-619, November.
- Adam B. Jaffe & Karen Palmer, 1996. "Environmental Regulation and Innovation: A Panel Data Study," NBER Working Papers 5545, National Bureau of Economic Research, Inc.
- Nameroff, T. J. & Garant, R. J. & Albert, M. B., 2004. "Adoption of green chemistry: an analysis based on US patents," Research Policy, Elsevier, vol. 33(6-7), pages 959-974, September.
- Milliman, Scott R. & Prince, Raymond, 1989. "Firm incentives to promote technological change in pollution control," Journal of Environmental Economics and Management, Elsevier, vol. 17(3), pages 247-265, November.
- Zvi Griliches, 1990.
"Patent Statistics as Economic Indicators: A Survey,"
NBER Working Papers
3301, National Bureau of Economic Research, Inc.
- Zvi Griliches, 1998. "Patent Statistics as Economic Indicators: A Survey," NBER Chapters, in: R&D and Productivity: The Econometric Evidence, pages 287-343 National Bureau of Economic Research, Inc.
- Griliches, Zvi, 1990. "Patent Statistics as Economic Indicators: A Survey," Journal of Economic Literature, American Economic Association, vol. 28(4), pages 1661-1707, December.
- Malueg, David A., 1989. "Emission credit trading and the incentive to adopt new pollution abatement technology," Journal of Environmental Economics and Management, Elsevier, vol. 16(1), pages 52-57, January.
- Kemp, René & Pontoglio, Serena, 2011. "The innovation effects of environmental policy instruments — A typical case of the blind men and the elephant?," Ecological Economics, Elsevier, vol. 72(C), pages 28-36.
- Cremeans, John E, 1977. "Conceptual and Statistical Issues in Developing Environmental Measures-Recent U.S. Experience," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 23(2), pages 97-115, June.
- Nemet, Gregory F. & Kammen, Daniel M., 2007. "U.S. energy research and development: Declining investment, increasing need, and the feasibility of expansion," Energy Policy, Elsevier, vol. 35(1), pages 746-755, January.
- Downing, Paul B. & White, Lawrence J., 1986. "Innovation in pollution control," Journal of Environmental Economics and Management, Elsevier, vol. 13(1), pages 18-29, March.
- Lanjouw, Jean Olson & Mody, Ashoka, 1996. "Innovation and the international diffusion of environmentally responsive technology," Research Policy, Elsevier, vol. 25(4), pages 549-571, June.
- Magat, Wesley A., 1978. "Pollution control and technological advance: A dynamic model of the firm," Journal of Environmental Economics and Management, Elsevier, vol. 5(1), pages 1-25, March.
- Cameron Hepburn & Nicholas Stern, 2008. "A new global deal on climate change," Oxford Review of Economic Policy, Oxford University Press, vol. 24(2), pages 259-279, Summer.
- Brunnermeier, Smita B. & Cohen, Mark A., 2003. "Determinants of environmental innovation in US manufacturing industries," Journal of Environmental Economics and Management, Elsevier, vol. 45(2), pages 278-293, March.
- Horbach, Jens, 2008. "Determinants of environmental innovation--New evidence from German panel data sources," Research Policy, Elsevier, vol. 37(1), pages 163-173, February.
- Michael Fung, 2004. "Technological Opportunity and Productivity of R&D Activities," Journal of Productivity Analysis, Springer, vol. 21(2), pages 167-181, March.
- Jung, Chulho & Krutilla, Kerry & Boyd, Roy, 1996. "Incentives for Advanced Pollution Abatement Technology at the Industry Level: An Evaluation of Policy Alternatives," Journal of Environmental Economics and Management, Elsevier, vol. 30(1), pages 95-111, January.
When requesting a correction, please mention this item's handle: RePEc:lsg:lsgwps:wp98. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (The GRI Administration)
If references are entirely missing, you can add them using this form.