FEEM working papers "Note di lavoro" series
2012 .022

Environmental Policy and Directed Technological Change: Evidence from the European Carbon Market


Authors: Raphael Calel, Antoine Dechezleprêtre
Series: Climate Change and Sustainable Development
Editor: Carlo Carraro
Keywords: Directed Technological Change, EU Emissions Trading Scheme, Policy Evaluation
JEL n.: O3, Q55, Q58, C14

Abstract

This paper investigates the impact of the EU Emissions Trading Scheme (EU ETS) on technological change. We exploit installations-level inclusion criteria to estimate the impact of the EU ETS on firms patenting. We find that the EU ETS has increased low-carbon innovation among regulated firms by as much as 10%, while not crowding out patenting for other technologies. We also find evidence that the EU ETS has not impacted patenting beyond the set of regulated companies. These results imply that the EU ETS accounts for nearly a 1% increase in European lowcarbon patenting compared to a counterfactual scenario.

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