Scandinavian Working Papers in Economics
Working Papers in Economics,
University of Gothenburg, Department of Economics
No 797: Emissions Trading Schemes and Directed Technological Change: Evidence from China
Ruijie Tian ()
Additional contact information
Ruijie Tian: Department of Economics, School of Business, Economics and Law, Göteborg University, Postal: P.O. Box 640, SE 40530 GÖTEBORG, Sweden
Abstract: This paper examines the impact of carbon emissions trading schemes (ETS) on technical change proxied by the number of green patents in the context of the pilot ETS in China. I find a small increase of 0.16 patents per firm and year. A 10 percent increase in carbon prices increases green patents by 2 percent. The strongest effects are for the two regions in the upper range of carbon prices and for more productive firms. However, there are contrasting patterns at the extensive and intensive margins of green innovation: the pilot ETS reduces entry into green innovative activities but increases levels of innovating for firms that were innovative before they were regulated by ETS, especially for the more productive firms. This indicates that an important policy challenge is to encourage the firms covered by ETS to start innovation in green technologies; this applies particularly to the larger and more productive firms.
Keywords: Carbon Pricing; Directed Technological Change; Innovation; Heterogeneous Firms.
72 pages, November 2020
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