ENVIRONMENTAL POLICY AND TECHNOLOGICAL CHANGE: The role of environmental policy in directing technological change toward renewable energies

Abstract

Inaction to climate change implies costs to the society in terms of natural disasters, slowdown of world food production, increasing vulnerability and poverty, spread of diseases and others. Taking action against climate change by reducing greenhouse gases (GHGs) emissions also produces costs, since moving from a fossil-fuel energy system to a low-carbon one requires significant investments into green innovations. However, the costs associated with the abatement of GHGs gases emissions can be lowered if environmental policy is shaped in a way to influence the direction of technical change toward clean innovations. For environmental policy to be cost-efficient in reducing GHGs emissions and promoting a low-carbon energy system, it is important to understand how environmental policy affects technological change and which instruments of environmental policy are better in directing technological change toward clean innovations. These two topics have attracted a lot of attention in economic literature, providing significant insights on the relation between environmental policy and technological change. According to the literature, environmental policy does promote innovation in the context of renewable energy innovations. Besides the aggregate impact of environmental policies on renewable energy innovations, scholars agreed that different environmental policy instruments direct technological change toward different and specific types of clean innovations. The aim of the dissertation is to support these views in order to highlight the crucial role of environmental policies in promoting a low-carbon energy system.