Working Paper: NBER ID: w30415
Authors: Mads Greaker; David Popp
Abstract: This paper provides a primer on the economics of environmental innovation. Our intention is not to write a pure review paper, but to also provide an up-to-date textbook treatment on the issue. Thus, we start by defining the marginal costs of both emissions and of emissions abatement. We then analyze theoretically how innovation may affect marginal abatement costs. We also cover the different modelling choices with respect to how the innovation process is represented mathematically and how different environmental policy measures could affect environmental innovation. Our theoretical propositions are all illustrated with examples from the empirical literature. A special emphasis is placed on the recent literature on directed technical change and the potential impact of government intervention in the research and development choices of private firms.
Keywords: Environmental Economics; Innovation; Regulation
JEL Codes: Q55; Q58
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| stronger market pull policies (J48) | increased environmental innovation (Q55) |
| emission limits and taxes (Q58) | reduced marginal abatement costs (D61) |
| emission limits (L94) | firms motivated to develop new technologies (O31) |
| government interventions (subsidies for R&D) (O38) | stimulate innovation (O35) |
| intellectual property rights (O34) | supports innovation process (O31) |