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Environmental regulation and the export dynamics of energy technologies

The pollution haven hypothesis (PHH) affirms that an open market regime will encourage the flow of low-technology polluting industries toward developing countries because of potential comparative advantages related io low environmentai standards. In contrast, the hypothesis suggested by Porter and vari der Linde claims that innovating firms operate in a dynamic competitive situation which allows global diffusion of environmental-friendly technologies. Environmental regulation may represent a relevant mechanism through which technological change is induced. In this way, countries that are subject io more stringent envíronmental regulations may become net exporters of environmental technologies. This paper provides new evidence ori the evolution of export ftows of environmental technologies across different countries for the energy sector. Advanced economies, particularly the European Union, have increasingly focused on the role of energy polîcies as tools for sustaining the development path. The Kyoto Protocol commitments, together with growing import dependence ori energy products, have brought attentìon to the analysis of ìnnovatìon processes in this specific sector. The analysis uses a gravity model in order io test the determinants and the transmission channels through which environmental technologies for renewable energies and energy efficiency are exported to advanced and developing countries. Our results are consistent with the Porter and van der Linde hypothesis where environmental regulation represents a significant source of comparative advantages. What strongly emerges is that the stringency of environmental regulation supplemented by the strength of the National Innovation System is a crucia1 driver of export performance in the field of energy technologíes.

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Paper provided by University of Turin in its series Department of Economics and Statistics Cognetti de Martiis LEI & BRICK - Laboratory of Economics of Innovation "Franco Momigliano", Bureau of Research in Innovation, Complexity and Knowledge, Collegio Carlo Alberto. WP series with number 200708.

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Length: 26 pages
Date of creation: Apr 2007
Date of revision:
Handle: RePEc:uto:labeco:200708
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