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Impacts of Environmental Policy Instruments on Technological Change EU Conference on Sustainable Development A Challenge for European Research Herman Vollebergh.

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Presentation on theme: "Impacts of Environmental Policy Instruments on Technological Change EU Conference on Sustainable Development A Challenge for European Research Herman Vollebergh."— Presentation transcript:

1 Impacts of Environmental Policy Instruments on Technological Change EU Conference on Sustainable Development A Challenge for European Research Herman Vollebergh Netherlands Envirionmental Assessment Agency Oxford University

2 2 Korte titel – auteur, datum Technological Change Policy R&D Decisions Investment Decisions Location Decisions Focus

3 3 Korte titel – auteur, datum D Directed Technological Change Policy R&D Decisions Investment Decisions Location Decisions Focus

4 4 Example I: EKC Results CO 2 OECD countries

5 5 Example II: EKC Results SO 2 OECD countries

6 Different Dynamic Incentives? What explains different pattern SO 2 and CO 2 ? Regulatory interventions through: Emission standards (e.g. for stationary sources) Tradeable Permits (e.g. US SO 2 program) Taxes (e.g. sulfur content coal) Effect on technological change? Differential impact between instruments? 6

7 7 Different Dynamic Incentives? Economic theory suggests stronger dynamic incentives from market based instruments continuous incentive for abatement Is there any empirical evidence for the hypothesis that market-based incentives have a stronger impact on rate and direction of technological change vis-à-vis their non-market alternatives?

8 8 QpQp output OQ* MDC(E) t*t* MAC 0 (E) SX MAC 1 (E) Q1Q1 Y Z P*P* Q2Q2 $ Background: Theory

9 Theory produces better understanding of: 1.Dynamics of technological change and its likely direction: invention – innovation – diffusion 2.Regulatory process in terms of information and strategy: interaction between regulator – regulated agents 9

10 Background: Empirics To identify relation empirically estimate: Techn.change = f (standards, taxes, tdp, controls) Options for identifying Techn.change: 1.Invention (R&D expend.; patents & citations) 2.Innovation (org. skills; new technologies & products) 3.Diffusion (penetration/scale; changing abatement costs) Few empirical studies pass critical tests! 10

11 Results (1) 1.Environmental policy in general: Env. regulation has impact on technological change: reduces growth bad, stimulates good firms/products Higher implicit price of emissions (e.g. energy price) boosts patents in friendly technology Level of pollution abatement cost linked to patents, but seems to be a good measure only of new regulation International cooperation (acid rain protocol) stimulates transfer of knowledge (NEW!) 11

12 Results (2) 2.Isolated policy instruments: CAC policy affects techn. change (both invention & innovation), but also captures rents new technologies Adoption strongly depends on firm-specific characteristics Effect of tax-cum-rebate schemes seems to depend strongly on its design and its level! Subsidies (or tax exemptions) also stimulate adoption even if not rational to adopt 12

13 Results (3) 3.Differential impact of policy instruments: Indirect incentives (energy price) seem not to affect rate of innovation, yet direction does change Combined effects matter (product labelling!) Impact of instruments depends above all on relative strictness (CAFE vs Energy price) Up-front costs important barrier to adoption new technology (loans more effective?) 13

14 Results (4) 3.Differential impact of policy instruments: Some evidence suggest MB-instruments have always effect, but not so for CAC (should be binding) CAC vs TDP in US Lead program suggests adoption propensity (permit sellers) stronger under TDP CAC vs TDP in US CAA confirms cost savings potential and effect on direction of technological change, but also an effect on its nature! 14

15 Future Research (1) 1.Focus in practice on CAC, though good examples not yet studied (e.g. energy taxes in the EU) 2.Practical policy usually cocktail, but too few data available to study differential impacts 3.Remarkable little analysis of instruments in controlled settings (field & laboratory experiments) 4.Very few European studies…. 15

16 Future Research (2) 5.Role of design instruments unclear (e.g. choice tax or regulatory base, positive vs. negative incentives, timing) 6.Little insight in role of firm-specific characteristics (e.g. adoption) 7.Bias to observable information (organizational change?) 8.What about effect on/from financial markets? 16

17 17

18 18 4 Conclusies Milieubeleid verandert richting van technologische ontwikkeling (zowel inventie, innovatie als diffusie) Crowding in (Porter) vs. crowding out onbeslist (Nog) geen duidelijke aanwijzing dat MBI sterker effect hebben op tempo of richting dynamiek dan CAC: regulering als dynamisch spel

19 19 4 Conclusies Er bestaat te weinig oog voor: dataverzameling tbv serieuze beleidsevaluatie lange termijn sectorverschuivingen (van mijnwerker tot vuilnisman) rol cultuurverschillen tussen landen bij keuze en beoordeling effectiviteit instrumenten belang vormgeving instrumenten en kosten daarvan (keuze belastinggrondslag, toedeling rechten) rol ondernemingsspecifieke karakteristieken belang financiële markten (venture capital)?

20 20 5 Stellingen VROM moet veel meer aandacht besteden aan early stage ideas Informatie in patenten; venture capital Alle milieubeleid stimuleert inventie, maar innovatie en diffusie erg gevoelig voor juiste (markt)prikkels EIA; feed-in tariffs; regulatory capture Tegenstelling tussen CAC en MCI is schijn CAC prijst ook; MCI kan niet zonder regels

21 21 3 Effect instrumentarium? Classic picture: Policy practice: standards & subsidies Economists: market based instruments (tradeable permits, taxes) Picture is bursting: Policy practice: fewer regulation, more market based instruments Economists: dynamic analysis requires updating


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