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Can non-market regulations spur innovations in environmental technologies? A study on firm level patenting

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This paper provides new evidence on the role of non-market based ("command-and-control") regulations in relation to innovations in environmental technologies. While pricing is generally considered the first-best policy instrument, non-market regulations, such as technology standards and non-tradable emission quotas, are common when a regulator faces multiple emission types and targets, heterogeneous recipients, or uncertainty with regard to marginal damages. Knowing whether these regulations spur or hinder innovation is of great importance to environmental policy. Using a unique Norwegian panel data set that includes information about the type and number of patent applications, technology standards, non-tradable emission quotas, and a large number of control variables for almost all large and medium-sized Norwegian incorporated firms, we are able to conduct a comprehensive study of the effect of non-market based regulations on environmental patenting. Unlike previous studies that are typically conducted at the industry level, we are able to take firm heterogeneiry into account, and thereby reduce the common problem of omitted variable bias in our analysis. We empirically identify strong and significant effects on innovations from implicit regulatory costs associated with the threat that a firm will be sanctioned for violating an emission permit.

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  • Marit E. Klemetsen & Brita Bye & Arvid Raknerud, 2013. "Can non-market regulations spur innovations in environmental technologies? A study on firm level patenting," Discussion Papers 754, Statistics Norway, Research Department.
  • Handle: RePEc:ssb:dispap:754
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    Cited by:

    1. Brita Bye & Marit E. Klemetsen, 2014. "The impacts of alternative policy instruments on environmental performance. A firm level study of temporary and persistent effects," Discussion Papers 788, Statistics Norway, Research Department.

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    Keywords

    Command-and-control regulations; Technology standards; Non-tradable emission quotas; Patents; Innovation; Environmental technologies; Random effects ordered probit model.;

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital
    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
    • 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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