You have reached an AEAweb test server. If this is in error, please contact email@example.com.
Adopt or Innovate: Understanding Technological Responses to Cap-and-Trade
- American Economic Journal: Economic Policy (Forthcoming)
One important motivation for creating cap-and-trade programs for
carbon emissions is the expectation that they will stimulate much-
needed low-carbon innovation. I construct a new panel of British
firms to investigate this hypothesis, finding that the European carbon market has encouraged greater low-carbon patenting and R&D
spending among regulated firms, without necessarily driving short-
term reductions in carbon intensity of output. This stands in contrast to past cap-and-trade programs, which have primarily spurred
adoption of existing pollution control technologies, with little effect
on innovation. I discuss how to reconcile these contrasting findings
and implications for the future of carbon markets.
Forthcoming Article Downloads