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Induced Innovation and Energy Prices
Abstract
I use U.S. patent data from 1970 to 1994 to estimate the effect of energy prices on energy-efficient innovations. Using patent citations to construct a measure of the usefulness of the existing base of scientific knowledge, I consider the effect of both demand-side factors, which spur innovative activity by increasing the value of new innovations, and supply-side factors, such as scientific advancements that make new innovations possible. I find that both energy prices and the quality of existing knowledge have strongly significant positive effects on innovation. Furthermore, I show that omitting the quality of knowledge adversely affects the estimation results. (JEL O31, Q40, Q42)
... Ley, Stucki & Woerter [31] show that energy prices and green innovation activities are positively related and that energy prices positively impact the ratio of green innovations to non-green innovations. Others, such as Aghion et al. (2012), Lanzi and Sue Wing (2011) and Popp [32], have found similar results. Popp [32] asserts that higher energy prices make energy-efficient inventions/innovations more valuable due to either larger energy savings (in monetary terms) or a greater market for energy-efficient inventions. ...
... Others, such as Aghion et al. (2012), Lanzi and Sue Wing (2011) and Popp [32], have found similar results. Popp [32] asserts that higher energy prices make energy-efficient inventions/innovations more valuable due to either larger energy savings (in monetary terms) or a greater market for energy-efficient inventions. ...
Achieving carbon neutrality by 2050 remains fundamental to limiting global warming to 1.5 ◦C this century and
mitigating the catastrophic effects of climate change. Policymakers have indicated that the transition towards a
renewable energy economy is the catalyst for achieving this. Transitioning towards a renewable energy economy
requires substantial investment in renewable energy technologies. While most empirical studies have explored
the linkage between investment in research and development (R&D) and carbon emissions, not much is known
empirically about the effect of energy innovation R&D on renewable energy generation. This study, therefore,
contributes to the literature by investigating the impact of energy innovation R&D on renewable energy generation
using a comprehensive panel dataset of 26 OECD countries from 1974 to 2020. Using a battery of robust
alternative estimation methods, the results indicate that energy innovation R&D generally does not increase total
renewable energy generation in the panel of OECD countries. The results further show that energy innovation
R&D has a heterogeneous effect on disaggregated renewable energy sources such as solar energy, wind energy,
nuclear energy, and hydro energy generation.
... Moreover, the research by Balado-Naves et al. (2018) and Sharif et al. (2019) also showed that renewable energy consumption had a positive impact on carbon emission reduction. Environmental regulations would emphasize the reduction of carbon emissions by promoting innovative activities and reducing production costs (Popp 2002). Environmental policy stringency could promote cleaner production by influencing R&D spending, patents, and total factor productivity in the long run and promote technological innovation (Rubashkina et al. 2015). ...
... On the one hand, the constraint effect brought by the implementation of green policies will strengthen the intensity of regional environmental regulations, increase the cost of pollution control, and force enterprises to carry out energysaving and environmental protection transition and innovate traditional production processes. Environmental regulations will emphasize the reduction of carbon emissions by promoting innovative activities and reducing production costs (Popp 2002). Environmental policy stringency can promote cleaner production by influencing R&D spending, patents, and total factor productivity in the long run and promote technological innovation (Rubashkina et al. 2015). ...
Carbon emissions are important factors causing global warming, which requires global efforts to deal with. In this paper, we investigate the mechanism of financial innovation on reducing carbon emissions in China by constructing a financial innovation development index with factors of green finance as well as fintech development. Empirical results show that financial innovation contributes to reduce carbon intensity by promoting energy structure transition as well as public fiscal expenditure on energy conservation and environmental protection. Moreover, heterogeneity exists in the effect of financial innovation on carbon emission reduction. Financial innovation has a significant role in reducing carbon intensity in eastern regions, but has a relatively small influence on central and western regions. Furthermore, financial innovation has a lag effect on reducing carbon intensity.
... Pervasiveness overlaps with the concept of 'saturation' from economics, which is the point at which the rate of diffusion of a product or service plateaus (Popp, 2002). ...
A general purpose technology (GPT) is an exceptional link in a complex chain of innovations connected through space and time. Common examples include the steam engine, electrification, and the automobile (Bresnahan & Trajtenberg, 1995; Bresnahan & Trajtenberg, 1995; & Bekar, et. al., 2018). A GPT is set apart from other innovations because of the massive breadth, depth, and duration of their impact on our world and, therefore, worthy of special consideration. 'pervasiveness dimensions' of a candidate GPT before its ultimate economic and societal impact is observed. Our candidate GPT is Artificial Intelligence (AI) and a key enabling technology, Deep Learning (DL). We trace the evolution of AI and DL from their birth in the latter half of the 20 th century to the present, with a focus on the diffusion of large-scale applications of AI/DL from 2000 to 2020 (Goldfarb, et. al, 2021). We are aided by a rich base of prior academic research across various disciplines as well as industry analyses and reports. We hope to add a forward-looking tool to the decision-makers toolkit, while also increasing our understanding of AI not only as an innovation but as an extraordinary technological, economic, social, and even political phenomenon. iii To my family and friends who pushed, guided, and encouraged me to pursue my curiosity, wherever it takes me. iv ACKNOWLEDGMENTS
... Es gibt zahlreiche Belege dafür, dass höhere Energiepreise und damit auch eine Bepreisung von THG-Emissionen energie-bzw. emissionssparende Innovationen auslösen (Popp, 2002;Ren et al., 2022;Teixidó et al., 2019). Eine strengere Klimapolitik ist nachweislich die wichtigste Triebkraft für private Investitionen in relevante F&E (Jaffe et al., 2005). ...
Rapid deployment and developments in green innovations are crucial for achieving climate neutrality. While market-based policy instruments are the backbone of climate policy, governmental support for research and development (R&D) complements an efficient policy mix that supports green innovations at all stages of the innovation process. Nonetheless, international R&D support has declined over the last decade. In an international comparison, Japan is at the forefront of green R&D support. Germany is also a leader in R&D support, but its market-based environmental policy stringency remains low, which undermines the importance of an adequate climate policy mix.
... This is because market-oriented management methods, such as emission taxes or tradable emission quotas and performance indicators, can promote enterprise innovation more than pure technical specifications -mainly reflected in their provision of more flexible choice space, allowing enterprises to have greater autonomy in finding technological solutions, which is conducive to reducing the cost of complying with regulations. Research has shown that strict environmental control has a positive impact on a company's innovation ability (Popp, 2002(Popp, , 2006 (Popp, 2006). However, some studies have also shown completely opposite conclusions. ...
The environmental protection tax reform implemented since January 1, 2018, occupies a significant position in China's environmental policy framework, and also marks a key practice of China's ecological and environmental protection tax in the new era. It is an important feature of the domestic environmental regulation policy system and an important measure for the implementation of China's ecological and environmental protection tax law in the new era. Against the backdrop of promoting high-quality domestic development strategies, how does this policy affect the motivation to stimulate green technological innovation and what effects does it have on the quantity and quality of green innovation behavior in society as a whole? This study selected A-share listed companies listed on the Shanghai and Shenzhen stock markets from 2014 to 2020 as samples, and used the promotion of environmental protection tax system as a quasi natural experimental scenario. A double difference model was used for empirical analysis to explore the specific impact of environmental protection tax system on the innovation of green technology in enterprises. The research results indicate that the reform of the environmental tax system effectively motivates enterprises to take action in green innovation and improves the quality of their innovation. These research conclusions can provide suggestions and theoretical basis for deepening environmental tax reform, building a market-oriented green technology innovation system, and forming a high-quality innovation intellectual property system.
... Bagayev et al., 2023) as well as changes in relative prices (e.g. Popp, 2002). However, the specificity of green innovations makes it necessary to rely on a mix of policy measures (Rogge and Reichardt, 2016). ...
Green innovations aim to improve and reduce the environmental impact of economic activities. Thus far, research focus on the positive trajectories of green transition. Continuing in this direction we focus on brown regions (i.e. specialized in fossil-fuel technologies) and the challenges that they face to become sustainable. Taking as example German Labour Market Regions we identify brown regions and measure their transition using an innovative approach based on Social Network Analysis and Knowledge Spaces. We find that the technological relatedness to green technologies, having a high life satisfaction in the region and the presence of the green party in the local government facilitate the transition. However, strong economic structures based on brown activities do not generally increase the transition speed. Our findings imply that technological and socio-economic characteristics influence the speed of transition, a dimension not yet accounted for in the sustainability transition literature.
... The belief that technological innovation contributes to the amelioration of carbon emissions and climate change has encouraged the global promotion of technological innovation (Popp, 2002;Zhang et al., 2017). However, most climate-change models ignore endogenous Second, in this study we also contribute to a widely discussed area of reducing carbon emissions and ameliorating global warming (Auffhammer et al., 2016;Li et al., 2017a). ...
Effective government-led innovation is essential for developing countries, such as China, which lack market mechanisms to address the threat of climate change. However, previous studies have ignored the role of government-led innovation in regard to carbon emissions. This study exploited exogenous quasi-natural experiments on a national innovative city pilot (NICP) policy and employed the difference-in-differences (DID) method to investigate the impact of government-led innovation on carbon emissions. This study concluded that government-led innovation can substantially reduce carbon emissions with a time-lag effect. The underlying mechanisms include improvements in technological innovation, energy consumption, and industrial structures. Government-led innovation encourages green innovation. Comparatively, this carbon reduction effect primarily exists in midwestern cities, cities with low administrative levels, and cities with high human capital. Our findings suggest that governments should try to increase their R&D investments in economically disadvantaged areas and focus on synergies with human capital to reduce carbon emissions.
... where Patent it is the number of patents we searched from the China Patent Search and Analysis Database [3]. We consider the depreciation rate and diffusion rate, which are denoted by l 1 and l 2 , and they are set to be 0.36 and 0.03, respectively (Popp, 2002). We plot the development level of STTI for the years 2000, 2010 and 2019 in Figure 2. ...
Purpose
The purpose of this study is to explore the causal relationship between smart transportation technology innovation and green transportation efficiency.
Design/methodology/approach
A comprehensive framework is used in this paper to assess the level of green transportation efficiency in China based on the instrumental variable – generalized method of moments model, followed by an examination of the impact of innovation in smart transportation technology on green transportation efficiency. Additionally, their non-linear relationship is explored, as are their important moderating and mediating effects.
Findings
The findings indicate that, first, the efficiency of green transportation is significantly enhanced by innovation in smart transportation technology, which means that investing in such technologies contributes to improving green transportation efficiency. Second, in areas where green transportation efficiency is initially low, smart transportation technology innovation exerts a particularly potent influence in driving green transportation efficiency, which underscores the pivotal role of such innovation in bolstering efficiency when it is lacking. Third, the relationship between smart transportation technology innovation and green transportation efficiency is moderated by information and communication technology, and the influence of smart transportation technology innovation on green transportation efficiency is realized through an increase in energy efficiency and carbon emissions efficiency.
Originality/value
Advancing green transportation is essential in establishing a low-carbon trajectory within the transportation sector.
... Similarly, the "diffusion effect" entails that the spread of new and updated technologies takes less time to be adopted in the industries and regions, which provides a basis for positive externality. Therefore, the study adopts the model constructed by Popp [61] to calculate RETI. ...
This ground-breaking research used simultaneous quantile regression (SQR) to explore the role of the digital economy and financial structure indexes proposed by principal component analysis on renewable energy technology innovations (RETI) for major eight (M-8) countries. Further, the research strengthened analysis by involving the moderating effects of governance and financial structure to seek the dynamic synergy between the digital economy and RETI nexus. The robustness of baseline models has been carried out through multiple estimators to draw several significant results. The findings of our study stimulated that the digital economy has a significantly positive impact on RETI. Put simply, a marginal growth of 1 % in the digital economy is correlated with a substantial average rise of 0.425% in the development of the RETI. Similarly, the financial structure assumes a crucial role, employing an average influence of 1.396% on the progress of RETI. Moreover, the moderation of governance and financial structure significantly contributes to developing a digital economy RETI nexus. The implications of these findings are extensive and have significant relevance for policymakers and academics in the M-8 countries. These insights are of great value as they can serve as a guiding tool for decision-making, providing direction on effectively utilizing the digital economy and financial framework to navigate the development of Renewable Energy Technology Infrastructure appropriately. The information is more than just facts and can serve as a strategic guide towards a future characterized by enhanced sustainability and innovation.
... Currently, heavily discussed is the use of carbon pricing to induce NETs as many regions have carbon pricing schemes in place. It is assumed that a carbon price should indirectly induce NETs as removal becomes more expensive [68]. In addition, direct incentives are given in the EU ETS, whereby no allowances must be surrendered when using CCS [69]. ...
To achieve net-zero emissions by mid-century, the removal of carbon dioxide from the atmosphere through negative emission technologies (NETs) will play an integral part. With renewable energy technologies (RETs), there has already been the introduction and expansion of a clean technology that faced similar obstacles as NETs—high up-front costs, limited competitiveness, and low public perception. This article compares NET policy proposals with the lessons learned from RET support. For NETs, the use of R&D support for innovation is unequivocal due to its nascency, yet the demand-pull instrument differs whether NETs are used as an alternative mitigation strategy, as a bridging technology or as a last resort. As an alternative mitigation method, a market-based approach by integrating NETs into emission trading systems is applicable because the use of NETs has no additional environmental benefit compared to abatement. Using NETs as a bridging technology requires restricting the demand for NETs to control the volume, and possibly type of NETs. This can be achieved via mandates or auctions. As a last resort, the removal via NETs requires heavy state involvement as emission removal constitutes a pure public good. This warrants public procurement or even state-led NET operation.
... We conduct a range of explorative analyses. We first count PFs per year to examine the yearly technology development in terms of patented inventions (Acs et al., 2002;Popp, 2002;Singh, 2008). Our analysis considers both priority datesthat is, the closest date to the invention processand grant datesthat is, when the intellectual property protection for an invention is granted to the corresponding applicant. ...
Purpose
This paper aims to map the evolution of hydrogen-based technologies (HBTs) by examining the patenting activity associated to these technlogies from 1930 to 2020. In doing so, the study provides a novel perspective on the development of HBTs and offers implications for managers and policymakers.
Design/methodology/approach
We collected patent data at the level of patent families (PFs). Our sample includes 317,089 PFs related to hydrogen production and 62,496 PFs to hydrogen storage. We examined PF data to delineate the state of the art and major technical advancements of HBTs.
Findings
Our analysis provides evidence of an increasing patenting activity in the area of HBTs, hence suggesting relatively high levels of expectations on the economic potential of these technologies. US and Japan hold the largest proportion of PFs related to HBTs (about 60%), while European applicants hold the highest proportion of highly cited PFs (about 60%). While firms represent the applicant with the highest share of PFs, our analysis reveals that firms holding HBT PFs are primarily from the chemical sector.
Research limitations/implications
While our analysis is limited to examining patent data which capture some aspects of the innovation activity around HBTs (namelly, patented inventions), our study enriches existing literature by performinng a patent analysis on a much larger sample of data when compared to previous studies.
Practical implications
Two main implications emerge from our study. Firstly, there seems to be an urgent need to support the emergence of a dominant design so as to facilitate the consolidation and diffusion of the HBTs, hence the transition to a more sustainable energy production. Secondly, the majority of HBT PFs are held by a small number of countries. This, in turn, suggests opportunities to develop cross-country cooperation (e.g. international agreements, research and technology offices) to support the development and adoption of HBTs globally.
Social implications
Considering the results obtained in this study, from a social point of view, the attention that organizations have paid to hydrogen related technologies is evident. This suggests that the development HBTs can function as a social enabler for a sustianable energy transition.
Originality/value
Extant research has focused on the individual components of the hydrogen chain. As a result, we lack a comprehensive understanding of the progress made in the area of HBTs. To address this gap, this study examined HBTs by focusing on both production and storage technologies since their initial developments, hence adopting an observation period of about 70 years.
... Expanding on this concept, the "Strong Porter hypothesis" further suggests that reasonable environmental regulations such as carbon trading and carbon tax can effectively stimulate technological innovation in enterprises and offset the costs associated with environmental regulations [7]. Many research studies support both the "Porter hypothesis" and the "Strong Porter hypothesis" [11][12][13][14]. However, it is important to acknowledge the complexity of this matter, as some investigations reveal a more nuanced perspective. ...
To study the multi-factor linkage effect of carbon trading on green technology innovation, this paper employs the dynamic QCA analysis method and uses panel data from China's carbon trading pilot areas. The aim is to explore the causal path considering the time effect. Additionally, the Kruskal-Wallis rank sum test is applied to investigate the provincial coverage difference of the configuration and reveal the variation in configuration preferences between regions from a spatial dimension. The results indicate that a single factor alone does not constitute the necessary conditions for the “quantity” and “quality” of high-green technology innovation. However, the necessity of carbon trading price exhibits a declining trend over the years, demonstrating the presence of a time effect. Regarding the sufficiency analysis of conditional configuration, it mainly includes a “price-market scale” dual effect model and a single market scale effect model, with three configuration paths for each model. Among them, the “price-market scale” dual effect model can drive the increase in the quantity of green technology innovation through carbon trading price, market scale, government intervention degree, and other factors. The single market scale effect model can promote the high-quality development of green technology innovation, but the impact of carbon trading price on the quality of green technology innovation is relatively insignificant. In terms of the time dimension, the three configurations still maintain good applicability to green technology innovation under normal conditions. However, when considering the spatial dimension, the coverage distribution of the three configurations exhibits evident regional differences. This study introduces the dynamic panel QCA method into the research field for the first time. It addresses the limitations of the traditional QCA method, which is constrained by cross-section data and lacks the ability to explore the linkage effect between factors over time. Additionally, the study analyzes the effects of carbon trading price and market size on the “quantity” and “quality” of green technology innovation, considering both time and space dimensions, from a configuration perspective.
... In an egalitarian society, knowledge and skills are shared. This encourages the spread of supply factors linked to the technical and scientific knowledge that drives innovation (Popp, 2002). Equal access to opportunities, an enlarged market, knowledge diffusion, knowledge diversity, and inclusion can reinforce each other, creating a virtuous circle favorable to innovation, where innovation in turn can help reduce income inequalities. ...
This study empirically analyzes, for the first time in Africa, the impact of innovation on income inequality over the period of 2000–2021. Three main results emerge: first, innovation is positively and significantly associated with income inequality at a threshold of 1%. Second, access to electricity, trade openness, CO2 emissions, and natural resource rents significantly reduce income inequality, while the opposite effect is observed for government consumption expenditure. Third, the results reveal a non-linear, inverted U-shaped relationship between innovation and income inequality. This suggests that there is a threshold above which innovation becomes a factor in reducing income inequality in Africa. In any case, it is incumbent upon African countries to consider innovation not only as a critical factor in the economic development of nations, but also as a potential vector for widening the income gap between individuals. A key recommendation would be to develop policies for the appropriation and absorption of innovation on the continent.
... The model is set according to our conceptual framework and also by referring to studies on the induced innovation hypothesis, as mentioned in Section 2 (e.g., Popp, 2002). New patents in RM-based technology areas are explained by science & technology push, demand pull and also supply dynamics of RM materials. ...
... In this study, the number of patents was used to represent the level of technological innovation, but this measurement ignores the reality of the decline of existing technology over time and the expansion of new technologies over time [36]. Therefore, this study adopted the method proposed by Popp, which took into account the decay and diffusion rates of the patent [37]. Renewable energy (RE) technology innovation was calculated as follows: ...
The increasing generation of renewable energy and its concurrent technological innovation are driving the transformations of the energy sector, but little effort has been made at the regional level to specify the heterogeneous impacts of different types of renewable energy development on multi-dimensional energy security. Therefore, this paper establishes a four-dimensional energy security assessment system based on the current energy market situation and economic context of China. Renewable energy generation and technological innovation were simultaneously used as the core proxies for renewable energy development. Then, the panel quantile regression method was used to analyze the heterogeneity of the impact of solar, hydro, and wind energy on energy security, covering 30 provinces in China from 2006 to 2019. The empirical results show that renewable energy power generation generally promotes energy security, but it cannot be effectively applicable to all levels of energy security. Renewable energy technology innovation has surprisingly hindered energy security. These results can serve as a policy and practical guide, suggesting that provincial governments in China should implement energy security and renewable energy policies in line with local characteristics.
... Popp (2002) provides micro evidence on the effect of energy price changes on the direction of R&D. 4 Building onPolgreen and Silos (2008),Polgreen and Silos (2009) investigate the relationship between oil prices and the skill premium. They explain the negative correlation between the two by short-run capital-energy complementarity. ...
Industry upgrading and structure transformation are important methods for the green and sustainable development. This paper utilizes urban panel data from China spanning the years 2009–2022 to investigate the impact of manufacturing and producer services collaborative agglomeration on green economy efficiency. Additionally, it examines the mediating effect of three modes of technical change: domestic technological stock, international technology transfer, and innovation absorptive capacity. The key findings are summarized as follows: (1) The impact of Industrial collaborative agglomeration (ICA) on green economy efficiency follows a U‐shaped curve relationship, when the degree of ICA is below the inflection point (1.4022), it negatively affects green economy efficiency. However, when the degree surpasses that point, it demonstrates a positive impact. (2) Domestic technological stock and international technology transfer act as mediating variables between ICA and green economy efficiency. Advancements in domestic technology innovation and increased international technology transfer contribute to a positive effect of ICA on green economic efficiency.
The proponents of the conventional detrimental view contend that government ownership results in efficiency losses, which suggests that it has a negative effect on corporate green innovation at private firms with government shareholders. The beneficial view that we propose in this study is that government ownership helps private firms to acquire the external resources that are needed for green innovation and to share the risks that attend on it, which suggests that government ownership has a positive effect on corporate green innovation at private firms with government shareholders. In this study, we use a large sample of privately controlled enterprises (PCEs) with government shareholders in the Chinese A‐share market to examine the beneficial view . The baseline results show that government ownership of PCEs is positively associated with corporate green innovation. These results are robust to a set of sensitivity tests and endogeneity concerns. Furthermore, the channel analyses show that government ownership of PCEs promotes corporate green innovation through the acquisition of external resources and the sharing of risks. Additionally, the cross‐sectional analyses show that the positive effect of government ownership of PCEs on corporate green innovation is stronger at firms that face more financial constraints, at firms that are subject to greater economic policy uncertainty, and at firms that are located in areas with poorer protection of intellectual property rights. Overall, the results confirm our beneficial view that government ownership has a positive effect on corporate green innovation at private firms with government shareholders.
Nghiên cứu phân tích mối quan hệ giữa thuế môi trường), tăng trưởng kinh tế, phát triển tài chính), và năng lượng tái tạo tại Việt Nam trong giai đoạn từ 2003 đến 2021 sử dụng mô hình hồi quy phân vịcùng với kiểm định nhân quả Granger trên từng phân vị. Kết quả chỉ ra rằng thuế môi trường, tăng trưởng và phát triển tài chính đều có ảnh hưởng đáng kể đến năng lượng tái tạo. Ảnh hưởng trên có thể gây ra ảnh hưởng tiêu cực hoặc tích cực đối với tiêu thụ năng lượng sạch, tùy thuộc vào bối cảnh và điều kiện cụ thể. Kết quả nghiên cứu khẳng định thuế môi trường như một chiến lược hiệu quả nhất để thúc đẩy việc sử dụng nguồn năng lượng xanh và đề xuất các chính sách cụ thể nhấn mạnh vào việc nâng cao vai trò của năng lượng tái tạo trong chiến lược phát triển về một tương lai năng lượng sạch và bền vững của Việt Nam.
Public investments in research, development, demonstration, and deployment in energy systems are crucial for accelerating the adoption of new energy technologies that can support a low-carbon just energy transition and promote the fair and equitable distribution of benefits and costs, improving social equity. However, the impact of energy innovation funding on social equity through progressing the just energy transition has not been explored in prior research for advanced economies. Thus, this research quantitively examines how energy innovation funding affects social equity in 23 developed economies for the period of 1995-2020. Employing a fixed effect, augmented mean group, and a system-generalized method of moments technique along with a mediating model, this study finds that increasing energy innovation funding significantly improves social equity directly as well as indirectly via accelerating energy justice in advanced economies. Therefore, proper allocation and utilization of public energy innovation budgets are necessary to promote clean energy technologies, advance the just energy transition, and improve social equity, inclusion, and community engagement. This study emphasizes the importance of policy interventions that promote a just energy transition and energy innovation funding to build resilient and inclusive energy systems that improve social equity while achieving Sustainable Development Goal 7, affordable and clean energy.
Using firm-level patent data from 1978 to 2015, I examine the impact of market-based environmental policies on innovation in energy storage. My results highlight the role of environmental taxes, feed-in tariffs for solar energy and tradable certificates for CO\(_2\) emission to promote firms’ patenting activity, whereas renewable energy certificates and energy efficiency certificates discourage it. These results imply the need for more stringent market-based environmental policies to incentivize innovation in energy storage.
Sweden was one of the first countries to introduce a carbon tax back in 1991. We assemble a unique data set tracking CO2 emissions from Swedish manufacturing firms over 26 years to estimate the impact of carbon pricing on firm-level emission intensities. We estimate an emission-to-pricing elasticity of around two, with substantial heterogeneity across subsectors and firms, where higher abatement costs and tighter financial constraints are associated with lower elasticities. A simple calibration suggests that 2015 CO2 emissions from Swedish manufacturing would have been roughly 30% higher without carbon pricing. (JEL H23, Q54, Q58, G32)
Decoupling of production activities and greenhouse gas (GHG) emissions, or a decline in GHG intensity, is a key metric for gauging GHG mitigation performances. In this study, we explore the determinants of GHG intensity in Canadian industries to understand its key drivers. This study is relevant, because Canada is a developed country characterized by high energy and GHG intensities. Canada has also introduced a series of policy measures to mitigate GHG emissions, including a carbon tax and investments in renewable electricity. The most significant factor for GHG intensity is energy intensity. However, fuel mix, policy trends, and sectoral shifts are essential. After conducting stationarity and cointegration tests, we estimated the relationship between GHG intensity and these determinants using panel error correction, dynamic fixed effects, and dynamic OLS methods to determine the long-run relationships. Besides the strong effect of energy intensity, we found that industrial production mix that indicates sectoral shifts, fuel mix, and the time-fixed effects that capture factors such as the introduction of a carbon tax and technology standards have statistically significant impacts on GHG intensity. We found that industries that rely more on fuel sources other than electricity are characterized by higher GHG intensity. The policy implication is that energy efficiency and fuel switching are essential for reducing GHG intensity, but the role of factors such as sectoral shifts should not be ignored.
Allocating scarce public funds to clean R&D might mean forfeiting higher economic gains from supporting other sectors, creating a tradeoff between economic and environmental goals. Our analysis of knowledge spillovers – the primary pathway for growth via innovation policy – suggests no such tradeoff: subsidy return rates are higher in Clean than in most other fields. But designing clean innovation policy based on national interests alone is inefficient, with EU-wide coordination boosting EU returns by 25% and global coordination raising worldwide returns by over 60%. Our analysis of cross-border knowledge spillovers suggests the EU could significantly benefit from US clean-focused policies like the Inflation Reduction Act.
We develop a methodology for testing Hicks's induced innovation hypothesis by estimating a product-characteristics model of energy-using consumer durables, augmenting the hypothesis to allow for the influence of government regulations. For the products we explored, the evidence suggests that (i) the rate of overall innovation was independent of energy prices and regulations; (ii) the direction of innovation was responsive to energy price changes for some products but not for others; (iii) energy price changes induced changes in the subset of technically feasible models that were offered for sale; (iv) this responsiveness increased substantially during the period after energy-efficiency product labeling was required; and (v) nonetheless, a sizable portion of efficiency improvements were autonomous.
Explores how technological innovation has shaped and been shaped by science, industry, and economics in the twentieth century. Technological change and specific technologies have impacted productivity, the learning process, technology transfer and technology policies. Starting with a summary of historical literature on technical progress, the book goes on to discuss and promote Karl Marx's influential method of studying technology as the result of interrelated social processes -- especially emphasizing the mutual interaction between technology and the economy. Analysis of current empirical studies shows the need for an enlarged framework for understanding the relation between the economy and technical change. Technological interdependence in the American economy is analyzed, and later expanded to encompass international business. High-tech industries are discussed as particularly reliant upon scientific research. The commercial aircraft industry from 1925-75 is also examined, as an exemplary instance in which technological innovation and government support and regulation allowed for economic success. The book concludes that scientific progress is heavily influenced by technological considerations that are, in turn, shaped by industry and economics. Thus, decisions made in the private and public sectors should affect both supply and demand, favoring the creative, mutually advantageous connection between science and technology. (CJC)
A number of recent empirical studies of technical change at the level of the individual firm have concluded that market demand is the dominant influence upon the innovation process, “calling forth” innovations in market economies. The pace of innovation in the private sector heavily influences the growth of national output and productivity, and these studies and their conclusions have therefore received much attention, having been extensively quoted in discussions of appropriate government policy for the encouragement of innovation. This paper reviews a number of these studies and concludes that their findings, and the interpretations of their findings in the secondary literature, are seriously flawed and, in many cases, invalid. The proposition that market demand governs the innovation process is by no means conclusively demonstrated in these studies, and they are therefore inadequate and inappropriate guides for the formulation of policy.Most of the studies examined employ a working definition of “demand factors” which is so broad as to embrace a range of possible influences upon innovation which should more properly be classified elsewhere. The concept of demand utilized in these studies bears little resemblance to the more restrictive and precise definition of market demand found in economics. In addition, the phenomena analyzed in these studies are a very heterogeneous lot; the studies do not address identical empirical questions, and their findings are, as a result, neither uniform nor unambiguous.Both demand and supply side influences are crucial to understanding the innovation process, and it is the exclusive preoccupation with only one set of these forces which is criticized in this paper. Some implications of the criticism for government policy toward innovation are discussed in the conclusion.
This paper investigates the significance of induced technological change (ITC) for the attractiveness of CO2 abatement policies. We use analytical and numerical general equilibrium models in which technological change results from profit-maximizing investments in R&D. We show that carbon abatement policies have very different impacts on R&D across industries, and do not necessarily raise the economy-wide rate of technological progress. Focusing only on the sectors with positive R&D impacts can lead to substantial underassessment of the GDP costs of CO2 abatement policies. The presence of ITC implies lower costs of achieving a given abatement target, but it implies higher gross costs (costs before netting out environment-related benefits) of a given carbon tax. Gross costs depend importantly on the efficiency of R&D markets prior to the introduction of CO2 policies.
This paper proposes a methodology to investigate the process of technical change with a focus on the dynamic effects of R&D investments on productivity, and on the induced innovation hypothesis for both inputs and outputs. The approach builds on a nonparametric representation of the underlying technology. An application to U.S. agriculture is presented. By distinguishing between private and public R&D investments, the analysis provides useful insights into the source and the dynamic nature of technical progress. © 2000 by the President and Fellows of Harvard College and the Massachusetts Institute of Technolog
In a 1991 essay in Scientific American, Michael Porter suggested that environmental regulation may have a positive effect on the performance of domestic firms relative to their foreign competitors by stimulating domestic innovation. We examine the stylized facts regarding environmental expenditures and innovation in a panel of manufacturing industries. We find that lagged environmental compliance expenditures have a significant positive effect on R&D expenditures when we control for unobserved industry-specific effects. We find little evidence, however, that industries' inventive output (as measured by successful patent applications) is related to compliance costs. © 2000 by the President and Fellows of Harvard College and the Massachusetts Institute of Technolog
We compare the geographic location of patent citations with that of the cited patents, as evidence of the extent to which
knowledge spillovers are geographically localized. We find that citations to domestic patents are more likely to be domestic,
and more likely to come from the same state and SMSA as the cited patents, compared with a “control frequency” reflecting
the pre-existing concentration of related research activity. These effects are particularly significant at the local (SMSA)
level. Localization fades over time, but only very slowly. There is no evidence that more “basic” inventions diffuse more
rapidly than others.
The extent to which new technological knowledge flows across institutional and national boundaries is a question of great importance for public policy and the modeling of economic growth. In this paper we develop a model of the process generating subsequent citations to patents as a lens for viewing knowledge diffusion. We find that the probability of patent citation over time after a patent is granted fits well to a double-exponential function that can be interpreted as the mixture of diffusion and obsolescense functions. The results indicate that diffusion is geographically localized. Controlling for other factors, within-country citations are more numerous and come more quickly than those that cross country boundaries.
R&D Tax policy in the United States during the nineteen-eighties is evaluated. with particular emphasis placed on quantifying the impact of the R&D tax credit on the R&D investment of manufacturing firms. Using publicly available data on R&D spending at the firm level, I estimate an average price elasticity for R&D spending which is in the neighborhood of unity in the short run. Although the effective credit rate is small (less than five percent until 1990), this relatively strong price response means that the amount of additional R&D spending thus induced was greater than the cost in foregone tax revenue. The recent evolution of features of the U.S. corporate tax system which affect R&D is also reviewed and my results are compared with those of previous researchers. The conclusion is that R&D tax credit seems to have had the intended effect, although it took several years for firms to fully adjust. I also argue that although high correlation over time of R&D spending at the firm level makes it difficult to estimate long run effects precisely, the same high correlation makes it probable that these effects are large.
This is a first report from a larger study of inventive activity of U.S. firms and some of its consequences. It reports on the relationship between patents applied for and R&D expenditures based on data for 121 large corporations covering the 1968-1975 period. The main conclusion is that there is a statistically significant relationship between a firm's R&D expenditures and the number of patents it applied for and receives. This relationship is very strong in the cross-sectional dimension (squared partial correlations of .8 or higher). It is weaker in the within-firm time-series dimension (partial r[squared]'s of .2 to .3). Attempts to fit an unconstrained distributed lag relationship yields only significant coefficients for the first and last terms in the lag structure, indicating both a quick response of patenting to changes in R&D and a small but persistent effect of past R&D, the truncation of this long lag being reflected in a significant coefficient for R&D lagged five years. In spite of these difficulties, patent counts do measure something systematic and hence are worthy of further study.
The pace of industrial innovation and growth is shaped by many forces that interact in complicated ways. Profit-maximizing firms pursue new ideas to obtain market power, but the pursuit of the same goal by others means that even successful inventions are eventually superseded by others; this is known as creative destruction. New ideas not only yield new goods but also enrich the stock of knowledge of society and its potential to produce new ideas. To a great extent, this knowledge is nonexcludable, making research and inventions the source of powerful spillovers. The extent of spillovers depends on the rate at which new ideas outdate old ones, i.e., on the endogenous technological obsolescence of ideas, and on the rate at which knowledge diffuses among inventors. In this paper we build a simple model that allows us to organize our search for the empirical strength of the concepts emphasized in the preceding. We then use data on patents and patent citations as empirical counterparts of new ideas and knowledge spillovers, respectively, to estimate the model parameters. We find estimates of the average annual rate of creative destruction in the range of 2-7% for the decade of the 1970s, with rates for individual sectors as high as 25%. For technological obsolescence, we find an increase over the century from about 3% per year to about 12% per year in 1990, with a noticeable plateau in the 1970s. We find the rate of diffusion of knowledge to be quite rapid, with the mean lag between one and two years. Last, we find that the potency of spillovers from old ideas to new knowledge generation (as evidenced by patent citation rates) has been declining over the century; the resulting decline in the effective public stock of knowledge available to new inventors is quite consistent with the observed decline in the average private productivity of research inputs.
In this paper a method of estimating the parameters of a set of regression equations is reported which involves application of Aitken's generalized least-squares [1] to the whole system of equations. Under conditions generally encountered in practice, it is found that the regression coefficient estimators so obtained are at least asymptotically more efficient than those obtained by an equation-by-equation application of least squares. This gain in efficiency can be quite large if “independent” variables in different equations are not highly correlated and if disturbance terms in different equations are highly correlated. Further, tests of the hypothesis that all regression equation coefficient vectors are equal, based on “micro” and “macro” data, are described. If this hypothesis is accepted, there will be no aggregation bias. Finally, the estimation procedure and the “micro-test” for aggregation bias are applied in the analysis of annual investment data, 1935–1954, for two firms.
In this paper an attempt is made to give precise expression to the conditions under which a profit maximizing firm with fixed research budget will choose each type of technical change (i.e., "neutral" and "nonneutral"). It was found that the optimal choice depends on the initial technology, relative factor prices, and relative costs of acquiring different types of technical change. The preferred technical change need not be exclusively of one sort (e.g., "neutral" change). Once "neutral" technical change becomes optimal, however, it remains so until there is a change in relative factor prices. On the other hand, adoption of a "biased" technical change may eventually cause "neutral" advance to become desired even in the absence of relative factor price change. Examination of the firm's decision criterion under the assumption that it is a monopsonistic buyer of factors of production, discloses that under identical initial conditions (i.e., relative factor prices and relative costs of alternative forms of technical change) the firm will prefer more "biased" technical change relative to the situation in which it purchases factors competitively. In particular, the firm will, under these condition, seek those "biased" technical changes which economize on the factor whose elasticity of supply is relatively smaller. Finally, it was also discovered that, contrary to previous suppositions, changes in the elasticity of substitution do affect the optimal capital-labor ration for each factor price combination in all cases but one.
In this paper a method of estimating the parameters of a set of regression equations is reported which involves application of Aitken's generalized least-squares [1] to the whole system of equations. Under conditions generally encountered in practice, it is found that the regression coefficient estimators so obtained are at least asymptotically more efficient than those obtained by an equation-by-equation application of least squares. This gain in efficiency can be quite large if “independent” variables in different equations are not highly correlated and if disturbance terms in different equations are highly correlated. Further, tests of the hypothesis that all regression equation coefficient vectors are equal, based on “micro” and “macro” data, are described. If this hypothesis is accepted, there will be no aggregation bias. Finally, the estimation procedure and the “micro-test” for aggregation bias are applied in the analysis of annual investment data, 1935–1954, for two firms.
In recent years a growing concern that the increasing accumulation of greenhouse gases will lead to undesirable changes in global climate has resulted in a number of proposals, both in the United States and internationally, to set physical targets for reducing greenhouse gas emissions. But what will these proposals cost? Based on the authors' earlier ground-breaking work, Buying Greenhouse Insurance outlines a way to think about greenhouse-effect decisions under uncertainty. It describes an insightful model for determining the economic costs of limiting carbon dioxide emissions produced by burning fossil fuels and provides a solid analytical base for rethinking public policy on the farreaching issue of global warming. Manne and Richels present region-by-region estimates of the costs that would underlie an international agreement. Using a computer model known as Global 2100, they analyze the economic impacts of limiting C02 emissions under alternative supply and conservation scenarios. The results clearly indicate that a reduction in emissions is not the sole policy response to potential climate change. Following a summary of the greenhouse effect, its likely causes, and possible consequences, Manne and Richels take up issues that concern the public at large. They provide an overview of Global 2100, look at how the U.S. energy sector is likely to evolve under business-as-usual conditions and under carbon constraints, and describe the concept of "greenhouse insurance." They consider possible global agreements, including an estimate of benefits that might result from trading in an international market in emission rights. They conclude with a technical description directed toward modeling specialists.
New evidence is presented on environmental innovation and diffusion over the 1970s and 1980s. At a global level, a substantial amount of innovations occurred. In the United States, Japan, and Germany, the share of environmental patents in all patents varied between 0.6 and 3%, and as such was higher than the corresponding share of pollution abatement expenditure in GDP. Japanese environmental innovation rates were consistently high. Certain plausible connections between environmental regulation and innovation also emerge. Across these three countries and over time, innovation responded to pollution abatement expenditure, an indicator of the severity of environmental regulations. Environmental patenting rates in developing countries were also high, reaching 2% in many years in Brazil. Developing country innovators obtained a non-trivial number of patents, most of which appear geared towards adapting imported technologies to local conditions. However, domestic innovation was only one path to new technologies. ‘Imports’ of disembodied environmental technologies (foreign patents registered in developing countries) were substantial. Foreign patents were typically ‘important’ or generic patents; evidence also suggests that such patents protected intellectual property in equipment exported. Developing countries, especially in East Asia, often chose to obtain technologies embodied in pollution abatement equipment.
We investigate the cause of an unprecedented surge of U.S. patenting over the past decade. Conventional wisdom points to the establishment of the Court of Appeals of the Federal Circuit by Congress in 1982. We examine whether this institutional change, which has benefited patent holders, explains the burst in U.S. patenting. Using both international and domestic data on patent applications and awards, we conclude that the evidence is not favorable to the conventional view. Instead, it appears that the jump in patenting reflects an increase in U.S. innovation spurred by changes in the management of research.
This paper starts out by reviewing the literature that in different ways utilizes patent data as a source of information in measuring technological change. The main focus, however, is an assessment of patent statistics used as a technology indicator. This is done by investigating the relationship between patenting and the innovation process. The analysis reveals many, and well-known, problems. The second part of the paper therefore reviews the research directed at improving the quality of the patent statistics as a technology indicator. This has been done in a number of ways depending on the focus of the analysis. In general we may conclude that it seems necessary to utilize the data at the lowest possible level of aggregation to overcome the problems of validity.
The objective of this paper is to investigate, within the framework of a two-sector investment model, the effect of dramatic changes in relative market opportunities on the relative amount of R & D invested in different types of projects. In particular, we formulate and estimate a simple model of the share of aggregate US industrial R & D devoted to ‘energy R & R’, as a function of two determinants of relative market opportunities: the real (or relative) price of energy, and the defence share of gross national product (GNP). During the period under consideration (1972–1983), there were sharp, abrupt, exogenous movements in both of these variables, which, our analysis indicates, jointly account for most of the variation in the allocation of R & D investment. Separate estimates of the response of privately and federally sponsored R & D investment are obtained.
A. The process of accumulating knowledge, 208. — B. Growth with non-stationary innovation possibility function, 213. — C.
Conclusion, 218.
We model early expectations about the value and technological importance ('quality') of a patented innovation as a latent variable common to a set of four indicators: the number of patent claims, forward citations, backward citations and family size. The model is estimated for four technology areas using a sample of about 8000 U.S. patents applied for during 1960-91. We measure how much noise' each individual indicator contains and construct a more informative, composite measure of quality. The variance in quality', conditional on the four indicators, is just one-third of the unconditional variance. We show the variance reduction generated by subsets of indicators, and find forward citations to be particularly important. Our measure of quality is significantly related to subsequent decisions to renew a patent and to litigate infringements. Using patent and R&D data for 100 U.S. manufacturing firms, we find that adjusting for quality removes much of the apparent decline in research productivity (patent counts per R&D) observed at the aggregate level.
This paper reviews the historical data on patenting in the United States with special reference to the last 20 years and their potential relation, if any, to the recent productivity slowdown. Two Points are made: Patents are not a "constant-yardstick" indicator of either inventive input or output. Moreover, they are "produced" by a governmental agency which goes through its own budgetary and inefficiency cycles. The paper shows that the appearance of an absolute decline in patenting in the 1970's is an artifact of such a cycle. This leaves us still with the longer run puzzle of a slower growth in patenting, especially by U.S. residents, relative to R&D expenditures. It is conjectured that this reflects more the changing character of patents and R&D than an indication of diminishing returns to R&D and an exhaustion of technological opportunities.
Federal lab commercialization is explored (1) by analyzing U.S. government patents and (2) in a qualitative analysis of one NASA lab's patents. Tests apply to three distinct sets of patents, l963-94: NASA, all other U.S. government, and a random sample of all U.S. inventors' patents. The federal patenting rate plummeted in the 1970s. Consistent with increasing commercialization, both NASA's and other federal agencies' rates recovered in the 1980s. The case study finds citations to be a valid, but noisy, measure of technology spillovers. Excluding 'spurious' cites, two-thirds of cites to patents of NASA-Lewis' Electro-Physics Branch were evaluated as involving spillovers. Copyright 1998 by Blackwell Publishing Ltd
The received theory of induced innovation implies that input prices, as well as other economic factors such as demand and market structure, determine the extent and nature of the optimizing firm's allocation of resources to research activity. This paper investigates the effects of large increases in the prices of energy and other intermediate materials during the early to mid 1970s on the amount of R&D performed by U.S. manufacturing firms. The evidence indicates that industries most affected by these price increases maintained the highest growth rate of R&D expenditure, holding constant output growth.
This paper focuses on developing and adapting statistical models of counts (non-negative integers) in the context of panel data and using them to analyze the relationship between patents and R&D expenditures. The model used is an application and generalization of the Poisson distribution to allow for independent variables; persistent individual (fixed or random) effects, and "noise" or randomness in the Poisson probability function. We apply our models to a data set previously analyzed by Pakes and Griliches using observations on 128 firms for seven years, 1968-74. Our statistical results indicate clearly that to rationalize the data, we need both a disturbance in the conditional within dimension and a different one, with a different variance, in the marginal (between) dimension. Adding firm specific variables, log book value and a scientific industry dummy, removes most of the positive correlation between the individual firm propensity to patent and its R&D intensity. The other new finding is that there is an interactive negative trend in the patents - R&D relationship, that is, firms are getting less patents from their more recent R&D investments, implying a decline in the "effectiveness" or productivity of R&D.
Invention possibilities are reformulated using research processes which have a cost and different implications for rates and biases of technical change. In the comparative static model a firm has the choice to build a plant of existing design or to improve it by research. The firm maximizes present value over the lifetime of the plant. Research costs and present value of capital and labor costs influence research mix and rate and bias to technical change. Controversies in the literature of induced innovation are discussed in terms of the model. A rise in labor costs does not necessarily lead to a more labor saving bias.
Exxon Mobil and ConocoPhillips stock price has been predicted using the difference between core and headline CPI in the United States. Linear trends in the CPI difference allow accurate prediction of the prices at a five to ten-year horizon.
Econometric AnalysisPatent statistics as economic indicators: a survey
- William H Greene
Greene, William H. (1993), Econometric Analysis, Macmillan Publishing Co., New York. r40 Griliches, Zvi (1990), “Patent statistics as economic indicators: a survey,” Journal of Economic Literature, 28, 1661-1707
- David Popp
Popp, David (1997), Induced Innovation, Enegy Prices, and the Environment, PhD Dissertation,
Yale University.
The Technology Pork Barrel, The Brookings Institution
- Linda R Cohen
- Roger G Noll
Cohen, Linda R. and Roger G. Noll (1991), The Technology Pork Barrel, The Brookings
Institution, Washington, D.C.
Energy Technology Choices: Shaping Our Future
Office of Technology Assessment (1991b), Energy Technology Choices: Shaping Our Future,
OTA-E-493, Washington, DC, U.S. Government Printing Office, July.
Patent Data by Industry Cowles Discussion Paper no
- Robert E Evenson
Evenson, Robert E. (1991), " Patent Data by Industry, " Cowles Discussion Paper no. 620, Yale
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Changing by Degrees: Steps to Reduce Greenhouse Gases
Office of Technology Assessment (1991a), Changing by Degrees: Steps to Reduce Greenhouse
Gases, Washington, D.C., U.S. Government Printing Office, February.