Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/177256
Authors: 
Nesta, Lionel
Verdolini, Elena
Vona, Francesco
Year of Publication: 
2018
Series/Report no.: 
Working Paper 004.2018
Abstract: 
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.
Subjects: 
Directed Technical Change
Threshold Models
Environmental Policies
Policy Mix
JEL: 
Q58
Q55
Q42
Q48
O34
Document Type: 
Working Paper
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