Threshold policy effects and directed technical change in energy innovation

This paper analyzes the effect of environmental policies on the direction of energy innovation across countries over the period 1990-2012. Our novelty is to use threshold regression models to allow for discontinuities in policy effectiveness depending on a country’s relative competencies in renewable and fossil fuel technologies. We show that the dynamic incentives of environmental policies become effective just above the median level of relative competencies. In this critical second regime, market-based policies are moderately effective in promoting renewable innovation, while command-and-control policies depress fossil based innovation. Finally, market-based policies are more effective to consolidate a green comparative advantage in the last regime. We illustrate how our approach can be used for policy design in laggard countries.

Written by Lionel Nesta, Elena Verdolini and Francesco Vona

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Latest papers published by INNOPATHS

INNOPATHS is a four year EU funded research project that aims to work with key economic and societal actors to generate new, state-of-the-art low-carbon pathways for the European Union. Below is a round-up of the latest research to come from INNOPATHS.

Anadón, L.D., Baker, E., Bosetti, V. (2017) Integrating uncertainty into public energy research and development decisions, Nature 2, Article number: 17071 Free access

Geddes, A., Schmidt, T., Steffen, B. (2018) The multiple roles of state investment banks in low-carbon energy finance: An analysis of Australia, the UK and Germany, Energy Policy 115, 158–170 Free access

Steffen, B. (2018). The importance of project finance for renewable energy projects, Energy Economics 69, 280-294 post-print manuscript

Verdolini, E, Anadon, LD, Baker, ED, Bosetti, V, Reis, L. (2018) The future of energy technologies: an overview of expert elicitations.’ Review of Environmental Economics and Policy Free access

Future prospects for energy technologies: insights from expert elicitations

Expert elicitation is a structured approach for obtaining judgments from experts about items of interest to decision makers. This method has been increasingly applied in the energy domain to collect information on the future cost, technical performance, and associated uncertainty of specific energy technologies. This article has two main objectives: (1) to introduce the basics of expert elicitations, including their design and implementation, highlighting their advantages and disadvantages and their potential to inform policymaking and energy system decisions; and (2) to discuss and compare the results of a subset of the most recent expert elicitations on energy technologies, with a focus on future cost trajectories and implied cost reduction rates. We argue that the data on future energy costs provided by expert elicitations allows for more transparent and robust analyses that incorporate technical uncertainty, which can then be used to support the design and assessment of energy and climate change mitigation policies.

Written by Elena Verdolini, Laura Díaz Anadón, Erin Baker, Valentina Bosetti, and Lara Aleluia Reis

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