Grégoire-Zawilski, Myriam and David Popp. 2024. “Do Technology Standards Induce Innovation in Environmental Technologies When Coordination is Important? ,” Research Policy, 53(1), 104888.
A next generation of innovation in enabling and complementary green energy technologies is needed to further accelerate the decarbonization of electricity systems. Few studies have investigated the policy determinants of innovation in this sector to glean insights on how governments may support the development and deployment of these technologies. Policies that were successful at supporting the first wave of renewables innovation may not be sufficient to produce similar results in the next wave of green innovation since those face higher coordination challenges. Using the case of smart grid technology, we investigate the effects of interoperability standards, an instrument that may facilitate coordination through establishing common technological frameworks, on inventive activity. Using firm-level analysis, we find that on average standards decrease firms’ patenting activity. We further find that this negative effect is driven by firms with high patenting intensity, whereas standards enable the entry of new firms into the field. We further find suggestive evidence that standards improve innovation quality.
Greaker, Mads and David Popp. 2023. “Environmental Economics, Regulation, and Innovation,” Chapter 8 in Handbook of Innovation and Regulation, Pontus Braunerhjelm, Martin Andersson, Knut Blind, and Johan E. Eklund, eds. Edward Elgar Publishing, pp. 141-162 (also available as NBER Working Paper #30415).
This paper provides a primer on the economics of environmental innovation. Our intention is not to write a pure review paper, but to also provide an up-to-date textbook treatment on the issue. Thus, we start by defining the marginal costs of both emissions and of emissions abatement. We then analyze theoretically how innovation may affect marginal abatement costs. We also cover the different modelling choices with respect to how the innovation process is represented mathematically and how different environmental policy measures could affect environmental innovation. Our theoretical propositions are all illustrated with examples from the empirical literature. A special emphasis is placed on the recent literature on directed technical change and the potential impact of government intervention in the research and development choices of private firms.
van den Heuvel, Matthias and David Popp. 2023. “The Role of Venture Capital and Governments in Clean Energy: Lessons from the First Cleantech Bubble,” Energy Economics, 124, 106877.
After a boom and bust cycle in the early 2010s, venture capital (VC) investments have, once again, been flowing towards some green businesses since 2015. In this paper, we use Crunchbase data on 150,000 US startups active between 2000 and 2021 to better understand why VC investments have been relatively unsuccessful when funding new clean energy technologies. Both lackluster demand and a lower potential for outsized returns make clean energy firms less attractive to VC than startups in ICT or biotech. However, we find no clear evidence that financial constraints such as high-capital intensity or long development timeframe are behind the lack of success of VC in clean energy. In addition, our results show that while public sector investments might help attract VC investment, the ultimate success rate of firms receiving public funding remains small. Thus, stimulating demand will have a greater impact on clean energy innovation than investing in startups with a low likelihood of success. Only with demand-side policies in place should governments try to plug funding gaps by targeting clean energy startups with low potential for outsized returns, as they could continue to struggle attracting private capital.
Popp, David and Myriam Grégoire-Zawilski. 2023. “Powering the next wave of green energy innovation,” PLOS Climate 2(1): e0000119.
Over the past two decades, innovation played an important role lowering the costs of technologies such as wind and solar energy. While rates of innovation have since fallen, the dramatic decrease in low-carbon energy prices suggests the wave of innovation in the early 2000s was successful. However, we observe similar declines in innovation for technologies that have not yet attained maturity and are critical for achieving decarbonization goals, such as smart grids, hydrogen and fuel cells, or energy storage. What have we learned from the success of innovation for technologies such as wind and solar energy, and how can these lessons be applied to foster continued innovation on these emerging technologies?
Popp, David, Jacquelyn Pless, Ivan Haščič and Nick Johnstone. 2022. “Innovation and Entrepreneurship in the Energy Sector,” Chapter 4 in The Role of Innovation and Entrepreneurship in Economic Growth, A. Chatterji, J. Lerner, S. Stern, and M.J. Andrews, eds. University of Chicago Press, pp. 175-248.
Historically, innovation in the energy sector proceeded slowly and entrepreneurial start-up firms played a relatively minor role. We argue that this may be changing. Energy markets are going through a period of profound structural change. The rise of hydrofracturing lowered fossil fuel prices so much that natural gas is now the primary fuel for electricity generation in the US. Renewable energy technologies also experienced significant cost and performance improvements. However, integrating intermittent resources creates additional grid management challenges, requiring further innovation. This chapter documents the evolving roles of innovation and entrepreneurship in the energy sector. First, we provide an overview of the energy industry, highlighting that many new energy technologies are smaller, modular, and increasingly rely on innovation in other fast-moving high-tech sectors. We then conduct two descriptive data analyses that document a sharp decline in both clean energy patenting and start-up activity from about 2010 onwards. We discuss potential explanations and provide some evidence that while innovation in existing technologies may simply have been successful, continued innovation will be needed in enabling technologies that are more likely to depend on progress in other sectors.
Popp, David, Francesco Vona, Giovanni Marin, and Ziqiao Chen. “The Employment Impact of Green Fiscal Push: Evidence from the American Recovery Act,” Brookings Papers on Economic Activity, Fall 2021, 1-49.
Investments in the green economy are used for both environmental goals and fiscal stimulus. The success of these investments depends, at least in part, on whether they create new jobs and whether such jobs are available to workers hurt by a green transition. We evaluate the employment effect of green investments from the American Recovery and Reinvestment Act (ARRA). Most job creation from green ARRA investments is permanent and emerged in the post-ARRA period, but the plausible range of estimates is extremely wide (0-25 jobs per $1 million dollars). Such large uncertainty on aggregate effects masks substantial heterogeneity across communities. The green stimulus mostly benefited areas with a greater prevalence of pre-existing green skills that created 40% additional jobs than average communities. New jobs are primarily manual labor and in occupations performing green tasks, especially in renewable energy. However, manual labor wages do not increase. Descriptive evidence suggests that the skill gap between green energy and fossil fuel workers is modest, but green jobs require significantly more training. Because the spatial distribution of skills and jobs matters, using green stimuli can help reshape the economy in the long-run, but may also exacerbate regional inequities associated with the green energy transition.
Grubb, Michael; Paul Drummond, Alexandra Poncia, Will McDowall, David Popp, Sascha Samadi, Cristina Peñasco, Kenneth Gillingham, Sjak Smulders, Matthieu Glachant, Gavin Hassall, Emi Mizuno, Edward Rubin, Antoine Dechezleprêtre, Giulia Pavan, “Induced innovation in energy technologies and systems: a review of evidence and potential implications for CO2 mitigation,” Environmental Research Letters 16(4), 043007.
We conduct a systematic and interdisciplinary review of empirical literature assessing evidence on induced innovation in energy and related technologies. We explore links between demand-drivers (both market-wide and targeted); indicators of innovation (principally, patents); and outcomes (cost reduction, efficiency, and multi-sector/macro consequences). We build on existing reviews in different fields and assess over 200 papers containing original data analysis. Papers linking drivers to patents, and indicators of cumulative capacity to cost reductions (experience curves), dominate the literature. The former does not directly link patents to outcomes; the latter does not directly test for the causal impact of on cost reductions. Diverse other literatures provide additional evidence concerning the links between deployment, innovation activities, and outcomes. We derive three main conclusions. (a) Demand-pull forces enhance patenting; econometric studies find positive impacts in industry, electricity and transport sectors in all but a few specific cases. This applies to all drivers—general energy prices, carbon prices, and targeted interventions that build markets. (b) Technology costs decline with cumulative investment for almost every technology studied across all time periods, when controlled for other factors. Numerous lines of evidence point to dominant causality from at-scale deployment (prior to self-sustaining diffusion) to cost reduction in this relationship. (c) Overall innovation is cumulative, multi-faceted, and self-reinforcing in its direction (path-dependent). We conclude with brief observations on implications for modelling and policy. In interpreting these results, we suggest distinguishing the economics of active deployment, from more passive diffusion processes, and draw the following implications. There is a role for policy diversity and experimentation, with evaluation of potential gains from innovation in the broadest sense. Consequently, endogenising innovation in large-scale models is important for deriving policy-relevant conclusions. Finally, seeking to relate quantitative economic evaluation to the qualitative socio-technical transitions literatures could be a fruitful area for future research.
Popp, David, “Promoting Clean Energy Innovation at the State and Local Level,” Agricultural and Resource Economics Review, August 2020, 49(2), 360-373.
Innovation is an important part of energy policy, and encouraging clean energy innovation is often an explicit goal of policy makers. For local governments, promoting clean energy innovation is seen not only as a pathway to a cleaner economy but also as a tool for promoting the local economy. But is such optimism warranted? There is a substantial literature examining the relationships between innovation and environmental policy, but few studies focus explicitly on innovation at the state and local level. In this paper, I provide key lessons from research on clean energy innovation, focusing on lessons relevant for state and local governments. I then summarize the results of a recent working paper by Fu et al. (2018) that studied wind energy innovation across individual states in the United States. While state-level policies can promote clean energy innovation, it is overall market size that matters most. Thus, innovation need not occur in those states most actively promoting clean energy. I conclude with lessons for state and local governments drawn from both this work and the broader literature on energy innovation.
Chen, Ziqiao, Giovanni Marin, David Popp, and Francesco Vona, “Green Stimulus in a Post‑pandemic Recovery: the Role of Skills for a Resilient Recovery,” Environmental and Resource Economics, August 2020, 76(4), 901-911.
As nations struggle to restart their economy after COVID-19 lockdowns, calls to include green investments in a pandemic-related stimulus are growing. Yet little research provides evidence of the effectiveness of a green stimulus. We begin by summarizing recent research on the effectiveness of the green portion of the 2009 American Recovery and Reinvestment Act on employment growth. Green investments are most effective in communities whose workers have the appropriate “green” skills. We then provide new evidence on the skills requirements of both green and brown occupations, as well as from occupations at risk of job losses due to COVID-19, to illustrate which workers are most likely to benefit from a pandemic-related green stimulus. We find similarities between some energy sector workers and green jobs, but a poor match between green jobs and occupations at risk due to COVID-19. Finally, we provide suggestive evidence on the potential for job training programs to help ease the transition to a green economy.
Popp, David, “Environmental Policy and Innovation: A Decade of Research,” International Review of Environmental and Resource Economics: Vol. 13: No. 3-4, pp 265-337.
Innovation is an important part of environmental policy, and encouraging innovation is often an explicit goal of policymakers. A large literature in environmental economics examines the links between environmental policy and innovation. Popp et al. (2010) provides an extensive review of the literature on environmental innovation. This paper updates that review, highlighting research published during the past decade, with a focus on empirical research examining links between environmental policy and environmentally friendly innovation. I highlight major trends in the literature, including an increased number of cross-country studies and a focus on the effect of different policy instruments on innovation. I include a discussion of the justifications and evidence for technology-specific policy incentives and present evidence on the effectiveness of government R&D spending. My review concludes with a discussion of three promising areas for new research on environmental innovation.
Vona, Francesco, Giovanni Marin, Davide Consoli, and David Popp, “Environmental Regulation and Green Skills: an empirical exploration,” Journal of the Association of Environmental and Resource Economists, October 2018, 5(4), 713-753.
This paper provides new evidence on the workplace skills most relevant in the transition towards environmentally sustainable economies. Using a novel data-driven methodology, we identify two main sets of green skills, namely: engineering skills for the design and production of technology, and managerial skills for implementing and monitoring environmental organisational practices. Exploiting exogenous geographical variation in regulatory stringency, we also evaluate the effect of environmental regulation on the demand of green skills for a panel of US metropolitan and non-metropolitan areas over the period 2006-2014. The main finding is that while these changes in environmental regulation have no impact on overall employment, they create significant, if modest, gaps in the demand for some green skills, especially those related to technical and engineering work tasks.
Verdolini, Elena, Francesco Vona, and David Popp, “Bridging the Gap: Do Fast Reacting Fossil Fuel Technologies Facilitate Renewable Energy Diffusion?” Energy Policy, May 2018, 116, 242-256.
The diffusion of renewable energy in the power system implies high supply variability. Lacking economically viable storage options, renewable energy integration is possible thanks to the presence of modern mid-merit fossil-based technologies, which act as back-up capacity. This paper discusses the role of modern fossil-based power generation technologies in supporting renewable energy investments. We study the deployment of these two technologies conditional on all other drivers in 26 OECD countries between 1990 and 2013. We show that moving from the first to the third quartile of the distribution of modern fossil technologies is associated with an increase in yearly renewable energy investment of between 6 and 14 kW per thousand people, on average and ceteris paribus. This is a sizeable effect, considering that average yearly renewable capacity addition in our sample are around 12 kW per thousand people. These findings are robust to different econometric specifications, various definitions of modern fossil technologies and are stronger for wind, which is more intermittent and for which the mismatch between supply and demand is more marked. Our analysis points to the substantial indirect costs of renewable energy integration and highlights the complementarity of investments in different generation technologies for a successful decarbonization process.
Hepburn, Cameron, Jacquelyn Pless, and David Popp, “Encouraging Innovation that Protects Environmental Systems: Five Policy Proposals” Review of Environmental Economics and Policy, Winter 2018, 12(1), 154-169.
The mix of public and private research funding investments in alternative energy presents a challenge for isolating the effect of government R&D funding. Factors such as energy prices and environmental policy influence both private and public R&D decisions. Moreover, because government R&D is further upstream from the final commercialized product, it may take several years for its effect on technology to be realized. Combining data on scientific publications for alternative energy technologies with data on government R&D support for these technologies, we address these challenges. First, we ask how long it takes for energy R&D to provide successful research outcomes. We both provide information on the lags between research funding and new publication and link these articles to citations in U.S. energy patents. One million dollars in additional government R&D funding leads to 1-2 additional publications, but with lags as long as ten years between initial funding and publication. Second, we ask whether adjustment costs associated with large increases in research funding result in diminishing returns to government R&D. There is no evidence of diminishing returns on the level of publication output, but some evidence that additional funding leads to lower quality publications, using citations as a measure of publication quality.
Santen, Nidhi R., Mort D. Webster, David Popp, and Ignacio Pérez-Arriaga, “Inter-temporal R&D and Capital Investment Portfolios for the Electricity Industry’s Low Carbon Future,” Energy Journal, 2017, 38(6), 1-24.
A pressing question facing policy makers today in developing a long-term strategy to manage carbon emissions from the electric power sector is how to appropriately balance investment in R&D for driving innovation in emerging low-and zero-carbon technologies with investment in commercially available technologies for meeting existing energy needs. Likewise, policy makers need to determine how to allocate limited funding across multiple technologies. Unfortunately, existing modeling tools to study these questions lack a realistic representation of electric power system operations, the innovation process, or both. In this paper, we present a new modeling framework for long-term R&D and electricity generation capacity planning that combines an economic representation of endogenous non-linear technical change with a detailed representation of the power system. The model captures the complementary nature of technologies in the power sector; physical integration constraints of the system; and the opportunity to build new knowledge capital as a non-linear function of R&D and accumulated knowledge, reflective of the diminishing marginal returns to research inherent in the energy innovation process. Through a series of numerical experiments and sensitivity analyses – with and without carbon policy – we show how using frameworks that do not incorporate these features can over-or under-estimate the value of different emerging technologies, and potentially misrepresent the cost-effectiveness of R&D opportunities.
Luo, Siping, Mary E. Lovely, and David Popp, “Intellectual Returnees as Drivers of Indigenous Innovation: Evidence from the Chinese Photovoltaic Industry,” World Economy, November 2017, 40(11), 2424-2454.
We offer new evidence on indigenous innovation and intellectual returnees by estimating the relationship between patenting activity by Chinese photovoltaic firms and the presence of corporate leaders with international experience. Our research approach combines data from three sources: the industrial census, international and domestic patent records, and leadership biographical information. Using non-linear methods, we find robust evidence that returnees positively influence patenting activity and promote neighbouring firm innovation. Our analysis suggests that market liberalisation and industry policy influence patent application counts. Controlling for R&D expenditures, we find that firms with returnees in leadership roles do more patenting.
Popp, David, “From Science to Technology: The Value of Knowledge From Different Energy Research Institutions,” Research Policy, November 2017, 46(9), 1580-1594.
Expansion of public energy R&D budgets continues to be a key component of climate policy. Using an original data set of both scientific articles and patents pertaining to three alternative energy technologies (biofuels, solar and wind energy), this paper provides new evidence on the flows of knowledge between university, private sector, and government research. Better understanding of the value of knowledge from these institutions can help decision makers target R&D funds where they are most likely to be successful. I use citation data from both scientific articles and patents to answer two questions. First, what information is most useful to the development of new technology? Does high quality science lead to applied technology development? I find that this is the case, as those articles most highly cited by other scientific articles are also more likely to be cited by future patents. Second, which institutions produce the most valuable research? Are there differences across technologies? Research performed at government institutions appears to play an important translational role linking basic and applied research, as government articles are more likely to be cited by patents than any other institution, including universities. Universities play a less important role in wind research than for solar and biofuels, suggesting that wind energy research is at a more applied stage where commercialization and final product development is more important than basic research.
Webster, Mort D., Karen Fisher-Vanden, David Popp, and Nidhi R. Santen, “Should We Give Up After Solyndra? Optimal Technology R&D Portfolios under Uncertainty,” Journal of the Association of Environmental and Resource Economists, September 2017, 4(S1), S123-S151.
Climate change and other environmental challenges require the development of new energy technologies with lower emissions. In the near term, R&D investments, either by the government or the private sector, can reduce the costs of these lower-emitting technologies. However, the returns to R&D are uncertain, and there are many potential technologies that may emerge to play an important role in the future energy mix. In this paper, we address the problem of allocating scarce R&D resources across technologies when uncertainties exist. We develop a multistage stochastic dynamic programming version of an integrated assessment model of the climate and economy that represents endogenous technological change through R&D decisions for two substitutable noncarbon backstop technologies. We demonstrate that near-term R&D investment in the higher cost technology is justified and that the optimal R&D investment in the higher cost technology increases with both higher variance and higher skewness in the distribution of returns to R&D.
Dechezleprêtre, Antoine and David Popp, 2017, “Fiscal and Regulatory Instruments for Clean Technology Development in the European Union,” Chapter 6 in Energy Tax and Regulatory Policy in Europe: Reform Priorities, edited by Ian Parry, Karen Pittel, and Herman Vollebergh, MIT Press, pp. 167-213. Earlier version appears as CESifo Working Paper 5361.
This policy note investigates whether the current level of public support to environment-friendly technologies is sufficient to allow European countries to respond to the multiple challenges posed by climate change and other environmental concerns. We first lay out the justifications for government support to clean R&D activity at the various stages of technology development, discussing particular features of clean technologies that justify policy intervention. We present empirical evidence for the impact of various policies on the development of clean technologies and use this to identify what the appropriate policy mix should look like. We present an overview of policies currently in place to support the development of clean technologies across Europe and compare the current policy landscape to the appropriate policy portfolio. This comparison allows us to provide some practical steps for reform.
Popp, David, “Economic Analysis of Scientific Publications and Implications for Energy Research and Development,” Nature Energy, April 2016, 1(4), 1-8, DOI: 10.1038/nenergy.2016.20.
The mix of public and private funding in alternative energy research makes isolating the effect of government funding challenging. Factors such as energy prices and environmental policy influence both private and public R&D decisions, and it may take several years for public R&D’s effect on technology to be realized. Here, by combining data on scientific publications for alternative energy technologies with data on government R&D support, I provide information on the lags between research funding and new publications and link these articles to citations in US energy patents. I find that US$1 million in additional government funding leads to one to two additional publications, but with lags as long as ten years between initial funding and publication. Finally, I show that adjustment costs associated with large increases in research funding are of little concern at current levels of public energy R&D support. These results suggest that there is room to expand public R&D budgets for renewable energy, but that the impact of any such expansion may not be realized for some time.
Tang, Tian and David Popp, “The Learning Process and Technological Change in Wind Power: Evidence from China’s CDM Wind Projects” Journal of Policy Analysis and Management, Winter 2016, 35(1), 195-222.
The Clean Development Mechanism (CDM) is a project-based carbon trade mechanism that subsidizes the users of climate-friendly technologies and encourages technology transfer. The CDM has provided financial support for a large share of Chinese wind projects since 2002. Using pooled cross-sectional data of 486 registered CDM wind projects in China from 2002 to 2009, we examine the determinants of technological change in wind power from a learning perspective. We use a spatial error model to estimate the effects of different channels of learning—learning through R&D in wind turbine manufacturing, learning from a firm’s previous wind project experience, spillovers from industry-wide project experience, and learning through the network interaction between project developer and turbine manufacturer—on technological change, measured as reductions in projected costs or as increased capacity factor across CDM wind projects. While we find that a project developer’s previous experience matters, interactions between a wind project developer and its partner foreign turbine manufacturer lead to the largest cost reductions and capacity factor improvement. We also find that spillovers from industry-wide experience only exist for wind farm installation. The evidence of industry-wide spillovers and the joint learning within partnerships between project developers and foreign turbine manufacturers supports the subsidies to users of wind technologies, and policy regimes that promote international collaboration and technology transfer.
Popp, David, “Climate-Friendly Technological Change for Developing Countries,” in Oxford Handbook of Macroeconomics of Global Warming, edited by Lucas Bernard and Willi Semmler, Oxford University Press, 2015, pp. 321-348. Earlier version appears as “The Role of Technological Change in Green Growth” NBER Working Paper #18506, November 2012 (also appears as World Bank Policy Research Working Paper #6239).
By reducing the costs of environmental protection, technological change is important for promoting green growth. This entails both the creation of new technologies and more widespread deployment of existing green technologies. This paper reviews the literature on environmentally friendly technological change, with a focus on lessons relevant to developing countries. I begin with a discussion of data available for measuring the various steps of technological change. I continue with a discussion of sources of environmental innovation. Given that most innovation is concentrated in a few rich countries, this leads to a discussion of the remaining role for lower-income countries, followed by a discussion of technology transfer. Because of the importance of market failures, I then discuss the role of both technology policy and environmental policy for promoting environmentally friendly technological change. The review concludes with a discussion of what environmental economists can learn from other fields.
Fisher-Vanden, Karen, David Popp, and Ian Sue Wing, “Introduction to the Special Issue on Climate Adaptation: Improving the connection between empirical research and integrated assessment models,” Energy Economics, November 2014, 46, 495-499 (with Karen Fisher-Vanden and Ian Sue Wing).
Miao, Qing and David Popp, “Necessity as the Mother of Invention: Innovative Responses to Natural Disasters ” Journal of Environmental Economics and Management, September 2014, 68(2), 280-295.
How do innovators respond to the shock of a natural disaster? Do natural disasters spur technical innovations that can reduce the risk of future hazards? This paper examines the impact of three types of natural disasters including earthquakes, droughts and flooding on the innovation of their respective mitigation technologies. Using patent and disaster data, our study is the first to relate natural disasters to technology innovation, and also presents the first attempt to empirically examine adaptation responses to climate change across multiple sectors at the country level. Overall, we show that natural disasters lead to more risk-mitigating innovations, while the degree of influence varies across different types of disasters and technologies.
Popp, David, Nidhi Santen, Karen Fisher-Vanden and Mort Webster, “Technology Variation vs. R&D Uncertainty: What Matters Most for Energy Patent Success?” Resource and Energy Economics, November 2013, 35(4), 505-533.
R&D is an uncertain activity with highly skewed outcomes. Nonetheless, most recent empirical studies and modeling estimates of the potential of technological change focus on the average returns to research and development (R&D) for a composite technology and contain little or no information about the distribution of returns to R&D—which could be important for capturing the range of costs associated with climate change mitigation policies—by individual technologies. Through an empirical study of patent citation data, this paper adds to the literature on returns to energy R&D by focusing on the behavior of the most successful innovations for six energy technologies, allowing us to determine whether uncertainty or differences in technologies matter most for success. We highlight two key results. First, we compare the results from an aggregate analysis of six energy technologies to technology-by-technology results. Our results show that existing work that assumes diminishing returns but assumes one generic technology is too simplistic and misses important differences between more successful and less successful technologies. Second, we use quantile regression techniques to learn more about patents that have a high positive error term in our regressions – that is, patents that receive many more citations than predicted based on observable characteristics. We find that differences across technologies, rather than differences across quantiles within technologies, are more important. The value of successful technologies persists longer than those of less successful technologies, providing evidence that success is the culmination of several advances building upon one another, rather than resulting from one single breakthrough. Diminishing returns to research efforts appear most problematic during rapid increases of research investment, such as experienced by solar energy in the 1970s.
Kim, Jung Eun, David Popp, and Andrew Prag, “The Clean Development Mechanism and Neglected Environmental Technologies,” Energy Policy, April 2013, 55, 165-179.
The Clean Development Mechanism (CDM) provides an institutional framework for developed countries to support projects that reduce greenhouse gas emissions in developing countries. Many of these projects result in the transfer of technologies to host countries. Are the technologies transferred those most needed by the recipient countries? We address this question by first reviewing Technology Needs Assessments prepared by developing countries, and then comparing the stated needs to the technologies most frequently transferred via CDM. While there appears to be a good match between requested technologies and those used in CDM, desired technologies such as solar energy for remote locations, biofuels, improved cooking stoves, and efficient lighting appear “neglected” by CDM. Nonetheless, a review of costs for these technologies suggests that they could be cost effective for developing countries. For projects requiring wide dispersal of household items, such as cooking stoves or lighting, the administrative burdens of CDM provide a hurdle. In other cases, mismatches between developing country needs and developed country technology capabilities appear to be a problem. We conclude with possible explanations for why these technologies are neglected and suggestions for future research.
Fisher-Vanden, Karen, Ian Sue Wing, Elisa Lanzi, and David Popp, “Modeling Climate Change Feedbacks and Adaptation Responses: Recent Approaches and Shortcomings,” Climatic Change, April 2013, 117(3), 481-495.
This paper offers a critical review of modeling practice in the field of integrated assessment of climate change and ways forward. Past efforts in integrated assessment have concentrated on developing baseline trajectories of emissions and mitigation scenario analyses. A key missing component in Integrated Assessment Models (IAMs) is the representation of climate impacts and adaptation responses. In this paper, we identify key biases that are introduced when climate impacts and adaptation responses are omitted from the analysis and review the state of modeling studies that attempt to capture these feedbacks. A common problem in these IAM studies is the lack of connection with empirical studies. We therefore also review the state of the empirical work on climate impacts and identify ways that this connection could be improved.
Popp, David and Richard Newell, “Where Does Energy R&D Come From? Examining Crowding out from energy R&D,” Energy Economics, July 2012, 34(4), 980-991.
Recent efforts to endogenize technological change in climate policy models demonstrate the importance of accounting for the opportunity cost of climate R&D investments. Because the social returns to R&D investments are typically higher than the social returns to other types of investment, any new climate mitigation R&D that comes at the expense of other R&D investment may dampen the overall gains from induced technological change. Unfortunately, there has been little empirical work to guide modelers as to the potential magnitude of such crowding out effects. This paper considers both the private and social opportunity costs of climate R&D. Addressing private costs, we ask whether an increase in climate R&D represents new R&D spending, or whether some (or all) of the additional climate R&D comes at the expense of other R&D. Addressing social costs, we use patent citations to compare the social value of alternative energy research to other types of R&D that may be crowded out. Beginning at the industry level, we find no evidence of crowding out across sectors – that is, increases in energy R&D do not draw R&D resources away from sectors that do not perform R&D. Given this, we proceed with a detailed look at alternative energy R&D. Linking patent data and financial data by firm, we ask whether an increase in alternative energy patents leads to a decrease in other types of patenting activity. While we find that increases in alternative energy patents do result in fewer patents of other types, the evidence suggests that this is due to profit-maximizing changes in research effort, rather than financial constraints that limit the total amount of R&D possible. Finally, we use patent citation data to compare the social value of alternative energy patents to other patents by these firms. Alternative energy patents are cited more frequently, and by a wider range of other technologies, than other patents by these firms, suggesting that their social value is higher.
Popp, David, Tamara Hafner and Nick Johnstone, “Environmental Policy vs. Public Pressure: Innovation and Diffusion of Alternative Bleaching Technologies in the Pulp Industry,” Research Policy, November 2011, 40(9), 1253-1268.
In the late 1980s and early 1990s, concern over dioxin in both paper products and wastewater led to the development of techniques that reduced the use of chlorine in the pulp industry. Both regulatory and consumer pressure motivated this change. Unlike previous studies, we use patent data to examine the evolution of two competing bleaching technologies in five major paper-producing countries, both of which reduce the use of chlorine in the pulping process. The use of patent data allows us to focus on the invention stage. However, adoption data are also presented, and by the end of the 1990s, nearly all pulp production in these countries used one of these technologies. While previous studies emphasize the importance of regulation for inducing innovation, here we find substantial innovation occurring before regulations were in place. Instead, pressure from consumers and the public at large to reduce the chlorine content of paper drove invention, prior to the introduction of environmental policies in any of the countries concerned.
Popp, David, Ivan Hascic and Neelakshi Medhi, “Technology and the Diffusion of Renewable Energy,” Energy Economics, July 2011, 33(4), 648-662.
We consider investment in wind, solar photovoltaic, geothermal, and electricity from biomass & waste across 26 OECD countries from 1991-2004. Using the PATSTAT database, we obtain a comprehensive list of patents for each of these technologies throughout the world, which we use to assess the impact of technological change on investment in renewable energy capacity. We consider four alternative methods for counting patents, considering two possible filters: weighting patents by family size and including only patent applications filed in multiple countries. For each patent count, we create knowledge stocks representing the global technological frontier. Technological advances do lead to greater investment, but the effect is small. Environmental policy appears more important, as countries that have ratified the Kyoto Protocol invest in more renewable capacity. Investment in other carbon-free energy sources, such as hydro and nuclear power, serve as substitutes for renewable energy. Comparing the effectiveness of our four patent counts, both using only patents filed in multiple countries and weighting by family size improve the fit of the model.
Popp, David, “International Technology Transfer for Climate Policy,” Review of Environmental Economics and Policy, Winter 2011, 5(1), 131-152.
As the developed world begins efforts to limit its emissions of greenhouse gases, economic growth in developing countries is causing increased emissions from the developing world. Reducing these emissions while still enabling developing countries to grow requires the use of climate-friendly technologies in these countries. In most cases, these technologies are first created in high-income countries. Thus, the challenge for climate policy is to encourage the transfer of these climate-friendly technologies to the developing world. This article reviews the economic literature on environmental technology transfer and discusses the implications of this literature for climate policy, focusing on the Clean Development Mechanism (CDM). A key point is that technology diffusion is gradual. Early adoption of policy by developed countries leads to the development of new technologies that make it easier for developing countries to reduce pollution as well. Since clean technologies are first developed in the world’s leading economies, international trade and foreign investments provide access to these technologies. Moreover, evidence suggests that some technologies, such as those enhancing energy efficiency, will diffuse to developing countries even without the aid of policy prescriptions such as the CDM. This is important for assessing the potential emissions reductions of proposed CDM projects.
Lovely, Mary and David Popp, “Trade, Technology, and the Environment: Does Access to Technology Promote Environmental Regulation,” Journal of Environmental Economics and Management, January 2011, 61(1), 16-35.
Focusing specifically on regulation of coal-fired power plants, we examine how technological innovation by early adopters influences the timing of new environmental regulation in non-innovating countries. We build a general equilibrium model of an open economy to identify the political-economy determinants of regulation. With a newly-created data set of SO2 and NOX regulations for coal-fired power plants and a patent-based measure of the technology frontier, we estimate the determinants of environmental regulation diffusion. Our findings support the hypothesis that international economic integration eases access to environmentally friendly technologies and leads to earlier adoption, ceteris paribus, of regulation in non-innovating countries. However, we also find evidence that domestic trade protection promotes earlier adoption by allowing shifts of regulatory costs to domestic consumers. Furthermore, international market power permits large countries to shift costs to foreign consumers. Other political economy factors, such as the quality of domestic coal, are also important determinants.
Driesen, David M. and David Popp, “Meaningful Technology Transfer for Climate Disruption,” Journal of International Affairs, 64(1), Fall/Winter 2010, 1-15.
Any serious effort to address global climate disruption will require effective technology transfer. Developing countries with growing emissions must somehow make emission reductions without curtailing the economic development needed to alleviate poverty. This must be done in order to permit global abatement on the scale required to avoid dangerous climate disruption. Given the limited financial and technical capabilities of developing countries, this task seems impossible without technology transfer. As policymakers continue to embrace and enhance technology transfer options, it is critical to understand the relationship between technology transfer and policy development in order to formulate more effective policies. Whether through market mechanisms, such as the Clean Development Mechanism (CDM), or direct aid programs, such as the Green Climate Fund, we argue that technology transfer programs must support the elaboration of policies in developing countries by addressing three key issues: adilitionality, appropriate scale and the promotion of knowledge spillovers. We use these three principles to provide a framework for assessing the potential of both the CDM and direct financial aid to foster meaningful technology transfer, which we define as technology transfer that not only lowers the overall short-run costs of carbon reductions, but also enhances the capacity of these countries to address climate change more thoroughly in the future.
Popp, David, “Innovation and Climate Policy,” Annual Review of Resource Economics, vol. 2, 2010, Gordon C. Rausser, V. Kerry Smith and David Zilberman eds., Annual Reviews, Palo Alto, CA, pp. 275-298.
Within the field of environmental economics, the role of technological change has received much attention. The long-term nature of many environmental problems, such as climate change, makes understanding the evolution of technology an important part of projecting future impacts. Moreover, in many cases environmental problems cannot be addressed, or can only be addressed at great cost, using existing technologies. Providing incentives to develop new environmentally-friendly technologies then becomes a focus of environmental policy. This chapter reviews the literature on technological change and the environment. Our goals are to introduce technological change economists to how the lessons of the economics of technological change have been applied in the field of environmental economics, and suggest ways in which scholars of technological change could contribute to the field of environmental economics.
Popp, David, “Technology Transfer: Alternative Perspective,” Smart Solutions to Climate Change, Bjørn Lomborg ed., Cambridge University Press, 2010, 371-378.
Popp, David, Richard Newell and Adam Jaffe, “Energy, the Environment, and Technological Change,” Handbook of the Economics of Innovation: vol. 2, Bronwyn Hall and Nathan Rosenberg, eds., Academic Press/Elsevier, 2010, 873-937.
Within the field of environmental economics, the role of technological change has received much attention. The long-term nature of many environmental problems, such as climate change, makes understanding the evolution of technology an important part of projecting future impacts. Moreover, in many cases environmental problems cannot be addressed, or can only be addressed at great cost, using existing technologies. Providing incentives to develop new environmentally-friendly technologies then becomes a focus of environmental policy. This chapter reviews the literature on technological change and the environment. Our goals are to introduce technological change economists to how the lessons of the economics of technological change have been applied in the field of environmental economics, and suggest ways in which scholars of technological change could contribute to the field of environmental economics.
Popp, David, “Exploring Links Between Innovation and Diffusion: Adoption of NOX Control Technologies at U.S. Coal-fired Power Plants,” Environmental and Resource Economics, March 2010, 45(3), 319-352.
While many studies have looked at innovation and adoption of technologies separately, the two processes are linked. Advances (and expected advances) in a single technology should affect both its adoption rate and the adoption of alternative technologies. This paper combines plant-level data on US coal-fired electric power plants with patent data pertaining to NOX pollution control techniques to study this link. As in other studies of environmental technologies, the effect of other explanatory variables is dominated by the effect of environmental regulations, demonstrating that the mere presence of environmental technologies is not enough to encourage its usage. Nonetheless, I do find that technological advances are important for the adoption of existing combustion modification technologies. However, these advances are less important for the adoption of newer post-combustion control techniques, which are adopted only when needed to comply with the strictest emission limits.
Johnstone, Nick, Ivan Hascic, and David Popp, “Renewable Energy Policies and Technological Innovation: Evidence Based on Patent Counts,” Environmental and Resource Economics, January 2010, 45(1), 133-155.
This paper examines the effect of environmental policies on technological innovation in the specific case of renewable energy. The analysis is conducted using patent data on a panel of 25 countries over the period 1978–2003. We find that public policy plays a significant role in determining patent applications. Different types of policy instruments are effective for different renewable energy sources. Broad-based policies, such as tradable energy certificates, are more likely to induce innovation on technologies that are close to competitive with fossil fuels. More targeted subsidies, such as feed-in tariffs, are needed to induce innovation on more costly energy technologies, such as solar power.
Bae, Hyunhoe, Peter Wilcoxen and David Popp, “Information Disclosure Policy: Do States’ Data Processing Efforts Help More than the Information Disclosure Itself?” Journal of Policy Analysis and Management, Winter 2010, 29(1), 163-182.
The Toxics Release Inventory (TRI) was expected to reduce health risks stemming from emissions of hazardous chemicals by increasing public pressure on polluters invoked by disclosed toxic release information. However, the raw TRI data fails to transmit accurate information fitted to the public’s interest. TRI is a massive and complex dataset, published in the pounds of toxics released in its raw form, not a health risk indicator which is the true quantity of interest. Consequently, the raw TRI data needs to be refined and interpreted in terms of health risks by the users/public but those processing data procedures often overwhelms their capability. State governments have attempted to increase of the usefulness of the TRI’s information via two types of policies: (1) selection and dissemination of raw TRI data for plants within the state, and (2) data processing activities producing more refined reports and further data analysis. This study assesses the effectiveness of those two types of policies with the hypothesis that the latter might increase the accuracy of the TRI information contributing to the true policy outcome (reducing health risk), more than the former. Our results show that state-level data dissemination efforts lowered the total number of pounds of chemicals released, but had little effect on health risks. State-level data processing efforts, in contrast, did lead to significant reductions in health risks. We conclude that simple dissemination of the data was ineffective (and even counterproductive in some instances), and that the states’ data processing efforts have played a critical role in achieving the TRI’s intended policy goal by providing accurate information with which users can find the right signal of interest.
Fleishman, Rachel, Rob Alexander, Stuart Bretschneider, and David Popp, “Does Regulation Stimulate Technical Productive Efficiency? The Effect of Air Quality Policies on the Efficiency of U.S. Power Plants,” Energy Policy, November 2009, 37(11), 4574-4582.
This research examines the effect of air quality regulations on the productivity of U.S. power plants based on both economic and environmental outputs. Using Data Envelopment Analysis (DEA) to estimate an efficiency measure incorporating both economic and environmental outcomes, we look at changes in efficiency in U.S. power plants over an eleven-year time period (1994-2004) during which several different regulations were implemented for the control of nitrogen oxides (NOx) and sulfur dioxide (SO2). The paper then models how estimated efficiency behaves over time as a function of regulatory changes. Findings suggest mixed effects of regulations on power plant efficiency when pollution abatement and electricity generation are both included as outputs.
Pizer, William A. and David Popp, “Endogenizing Technological Change: Matching Empirical Evidence to Modeling Needs,” Energy Economics, November 2008, 30(6), 2754-2770.
Given that technologies to significantly reduce fossil fuel emissions are currently unavailable or only available at high cost, technological change will be a key component of any long-term strategy to reduce greenhouse gas emissions. In light of this, the amount of research on the pace, direction, and benefits of environmentally-friendly technological change has grown dramatically in recent years. This research includes empirical work estimating the magnitude of these effects, and modeling exercises designed to simulate the importance of endogenous technological change in response to climate policy. Unfortunately, few attempts have been made to connect these two streams of research. This paper attempts to bridge that gap. We review both the empirical and modeling literature on technological change. Our focus includes the research and development process, learning by doing, the role of public versus private research, and technology diffusion. Our goal is to provide an agenda for how both empirical and modeling research in these areas can move forward in a complementary fashion. In doing so, we discuss both how models used for policy evaluation can better capture empirical phenomena, and how empirical research can better address the needs of models used for policy evaluation.
Wu, Yonghong, Stuart Bretschneider and David Popp, “The Effects of Innovation Policies on Private R&D Investment: A Cross-national Empirical Study,” Economics of Innovation and New Technology, June 2007, 16(4), 237–253.
This paper examines the effect of three major national innovation policies (patent protection, research and development (R&D) tax incentives, and government funding of business R&D) on business R&D spending. Unlike previous work, we also consider the effect of openness to international trade. We use data from nine OECD countries (Australia, Canada, France, Germany, Italy, Japan, Spain, UK, and USA) in 1985-1995. Our results show that all three innovation policies play a significant role in stimulating business R&D. Enforcement of patent right matters most to business R&D spending. In addition, R&D performed by the government has a positive effect on business R&D, whereas R&D by the higher education sector has a negative impact on business R&D. We also find modest empirical support to the positive role of openness to international trade in business R&D investment.
Popp, David, “They Don’t Invent Them Like They Used To: An Examination of Energy Patent Citations Over Time,” Economics of Innovation and New Technology, 15(8), November 2006, 753-776.
This paper uses patent citation data to study flows of knowledge across time and across institutions in the field of energy research. Popp (2002) finds the level of energy-saving R&D depends not only on energy prices, but also on the quality of the accumulated knowledge available to inventors. Patent citations are used to represent this quality. This paper explores the pattern of citations in these fields more carefully. I find evidence for diminishing returns to research inputs, both across time and within a given year. To check whether government R&D can help alleviate potential diminishing returns, I pay special attention to citations to government patents. Government patents filed in or after 1981 are more likely to be cited. More importantly, descendants of these government patents are 30 percent more likely to be cited by subsequent patents. Earlier government research was more applied in nature and is not cited more frequently.
Popp, David, “Innovation in Climate Policy Models: Implementing Lessons from the Economics of R&D,” Energy Economics, 28(5-6), November 2006, 596-609.
Only recently have economists considered the effect of induced innovation in climate policy models. One reason is that, until recently, empirical evidence of the magnitude of such effects was unavailable. Drawing on my experiences with empirical studies on innovation and from modeling the climate change problem, in this paper I present key lessons from the empirical literature on innovation and environmental policy, and discuss how much of the variation in results found in the modeling literature can be explained by differences in implementing (or failing to implement) these lessons into climate models. The paper concludes with a discussion of future research needs, focusing on a framework for improving the modeling of technology diffusion in climate change models.
Popp, David, “R&D Subsidies and Climate Policy: Is There a ‘Free Lunch’?“, Climatic Change, 77(3-4), August 2006, 311-341.
Because of the long-term nature of the climate problem, technological advances are often seen as an important component of any solution. However, when considering the potential for technology to help solve the climate problem, two market failures exist which lead to underinvestment in climate-friendly R&D: environmental externalities and the public goods nature of new knowledge. As a result, government subsidies to climate-friendly R&D projects are often proposed as part of a policy solution. Using the ENTICE model, I analyze the effectiveness of such subsidies, both with and without other climate policies, such as a carbon tax. While R&D subsidies do lead to significant increases in climate-friendly R&D, this R&D has little impact on the climate itself. Subsidies address the problem of knowledge as a public good, but they do not address the environmental externality, and thus offer no additional incentive to adopt new technologies. Moreover, high opportunity costs to R&D limit the potential role that subsidies can play. While R&D subsidies can improve efficiency, policies that directly affect the environmental externality have a much larger impact on both atmospheric temperature and economic welfare.
Popp, David, “Comparison of Climate Policies in the ENTICE-BR Model“, Energy Journal, Special Issue: Endogenous Technological Change and the Economics of Atmospheric Stablilisation, 2006, 163-174.
This paper uses the ENTICE-BR model to study the effects of various climate stabilization policies. Because the ENTICE-BR model includes benefits from reduced climate damages, it is possible to calculate the net economic impact of each policy. In general, only the least restrictive concentration limit is welfare enhancing. While the policies are welfare enhancing in simulations using optimistic assumptions about the potential of the backstop energy technology, such assumptions mean that the backstop is also used in the no-policy base case, so that climate change itself is less of a problem. Finally, assumptions about the nature of R&D markets are important. Removing the assumption of partial crowding out from energy R&D nearly doubles the gains from policy-induced energy R&D.
Köhler, Jonathan, Michael Grubb, David Popp and Ottmar Edenhofer, “The Transition to Endogenous Technical Change in Climate-Economy Models: A Technical Overview to the Innovation Modeling Comparison Project,” Energy Journal, Special Issue: Endogenous Technological Change and the Economics of Atmospheric Stablilisation, 2006, 17-55.
This paper assesses endogenous technical change (ETC) in climate-economy models, using the models in the Innovation Modeling Comparison Project as a representative cross-section. ETC is now a feature of most leading models. Following the new endogenous growth literature and the application of learning curves to the energy sector, there are two main concepts employed: knowledge capital and learning curves. The common insight is that technical change is driven by the development of knowledge capital and its characteristics of being partly non-rival and partly non-excludable. There are various different implementations of ETC. Recursive CGE models face particular difficulties in incorporating ETC and increasing returns. The main limitations of current models are: the lack of uncertainty analysis, the limited representation of the diffusion of technology and the homogeneous nature of agents in the models, including the lack of representation of institutional structures in the innovation process.
Popp, David, “ENTICE-BR: The Effects of Backstop Technology R&D on Climate Policy Models“, Energy Economics, March 2006, 28(2), 188-222.
Recent attempts to endogenize technology in climate policy models have produced mixed results. Models including alternative technologies find large gains from induced technological change. However, technological progress in these models comes through learning-by-doing, which ignores the potential opportunity costs of technological change. Models using R&D spending as the driver of technological change address this. However, since these models typically include only a single representative energy technology, substitution across technologies is not possible. This paper addresses these shortcomings by including policy-induced energy R&D in a model with a backstop energy technology. I show that, while induced technological change is important, larger welfare gains come from simply adding an alternative technology to the model. As in models with a single technology, opportunity costs of research limit the role induced innovation can play. Moreover, since the backstop technology improves welfare even without climate policy, accurate policy analysis depends on a carefully constructed baseline simulation.
Popp, David, “International Innovation and Diffusion of Air Pollution Control Technologies: The Effects of NOX and SO2 Regulation in the US, Japan, and Germany“, Journal of Environmental Economics and Management, January 2006, 51(1), 46-71.
Using patent data from the United States, Japan, and Germany, this paper examines both the innovation and diffusion of air pollution control equipment. Whereas the United States was an early adopter of stringent sulfur dioxide (SO2) standards, both Japan and Germany introduced stringent nitrogen dioxide (NOX) standards much earlier than the US. Nonetheless, in both cases, tightened standards in the U.S. led to more domestic patenting, but not more foreign patenting. Overall, the data suggest that inventors respond to environmental regulatory pressure in their own country, but not to foreign environmental regulations. Moreover, any technology transfer that occurs appears to be indirect. Domestic innovation occurs even for technologies that have already experienced significant innovative activity abroad. Moreover, utilities in countries that adopt regulations later nonetheless purchase pollution abatement equipment from domestic firms. However, patent citation data from the U.S. show that earlier foreign patents are an important building block for NOX pollution control innovations in the U.S., suggesting that American inventors build on technological advances made in countries that adopted stringent regulation earlier.
Popp, David, “Lessons From Patents: Using Patents to Measure Technological Change: in Environmental Models“, Ecological Economics, August 2005, 54(2-3), 209-226.
When studying solutions to long-term environmental problems such as climate change, it is important to consider the role that technological change may play. Nonetheless, to date few economic models of environmental policy explicitly model the link between policy and technological change. There is a growing body of evidence that the incentives offered by prices and environmental regulations have a strong influence on both the creation and adoption of new technologies. In several recent papers, I have used patent data to examine the links between environmental policy and technological change. In addition, I have used the results of this research to calibrate the ENTICE model (for ENdogenous Technological change) of climate change, which links energy-related R&D to changes in the price of carbon. Drawing on my experiences from empirical studies on innovation and from modeling the climate change problem, in this paper I review some of the key lessons from recent empirical work using patents to study environmental innovation and diffusion, and discuss its implications for modeling climate change policy. I conclude by offering suggestions for future research.
Popp, David, “Uncertain R&D and the Porter Hypothesis“, Contributions to Economic Analysis & Policy, 4(1), Article 6, 2005.
Ever since Michael Porter proposed that environmental regulations can improve competitiveness, much economic research has examined the potential for such outcomes. Attempts to model Porter hypothesis outcomes in a way consistent with neoclassical economics have focused on things such as strategic relationships between firms, moral hazard problems, and economies of scale. In this paper, I offer a simpler alternative. The results of any R&D project are uncertain. Calibrating a simple model of induced R&D with uncertainty so that the expected value of research is only positive with environmental policy, I find that between 8 and 24 percent of simulations result in cases where post-regulation profits are higher than pre-regulation profits. This result is consistent both with Porter finding specific cases with complete innovation offsets and with macro-level findings that environmental policy is not costless. I conclude by discussing the implication of these results for environmental policy and future research.
Dai, Yixin, Stuart Bretschneider and David Popp, “Institutions and Intellectual Property: The Influence of Institutional Forces on University Patenting“, Journal of Policy Analysis and Management, Summer 2005, 24(3), 579-598.
Over the past 20 years, the number of patents assigned to universities has increased dramatically. This increase coincided with several policy initiatives, such as the Bayh-Dole Act of 1980, designed to foster technology transfer between universities and the private sector. This paper examines the effect of such policies using an institutional framework, designed to illustrate how factors both from inside and outside of academia influence the decision to patent university research. We find passage of the Bayh-Dole Act spurred university patenting, but did not induce additional applied research funding. Thus, Bayh-Dole fostered technology transfer, but did not result in more applied research at universities.
Popp, David, Ted Juhl and Daniel K.N. Johnson, “Time In Purgatory: Examining the Grant Lag for U.S. Patent Applications“, Topics in Economic Analysis & Policy, 4(1), Article 29, 2004.
As patent applications increase, and the range of patentable technologies increases, the length of time it takes for an invention to go through the examination process at the U.S. Patent Office has increased. Concerns over the distributional effects of these changes have been expressed during policy debates. We use data on U.S. patent applications and grants to ask who is affected by longer grant lags. We augment this analysis with interviews of patent examiners, leading to a better understanding of the examination process. Our analysis finds that differences across technology are most important. These differences do not erode over time, suggesting that learning effects alone will not reduce grant lags. Inventor characteristics have statistically significant effects, but the magnitudes are small.
Popp, David, “ENTICE: Endogenous Technological Change in the DICE Model of Global Warming“, Journal of Environmental Economics and Management, July 2004, 48(1), 742-768.
Despite growing empirical evidence of the link between environmental policy and innovation, most economic models of environmental policy treat technology as exogenous. For long-term problems such as climate change, this omission can be significant. In this paper, I modify the DICE model of climate change (Nordhaus 1994, Nordhaus and Boyer 2000) to allow for induced innovation in the energy sector. Ignoring induced technological change overstates the welfare costs of an optimal carbon tax policy by 8.3 percent. However, cost-savings, rather than increased environmental benefits, appear to drive the welfare gains, as the effect of induced innovation on emissions and mean global temperature is small. Sensitivity analysis shows that potential crowding out of other R&D and market failures in the R&D sector are the most important limiting factors to the potential of induced innovation. Differences in these key assumptions explain much of the variation in the findings of other similar models.
Popp, David, “Innovation and Energy Prices,” in Encyclopedia of Energy, vol 3, Academic Press/Elsevier, 2004, 451-458.
Popp, David, “Pollution Control Innovations and the Clean Air Act of 1990“, Journal of Policy Analysis and Management, Fall 2003, 22(4), 641-660.
One advantage often cited for market-based environmental policies is that they are more likely to promote technological innovation than command and control regulations. This paper uses patent data to study innovation in flue gas desulfurization units (“scrubbers”) across these policy regimes. Using plant level data to study the effect of these patents on pollution control, I find the effect of these patents changed after passage of the 1990 Clean Air Act, which instituted a market for sulfur dioxide (SO2) permits. Previous regulations requiring plants constructed before 1990 to install scrubbers created incentives for innovation that lowered the costs of operating scrubbers, but did little to improve the environmental effectiveness of the technology. In comparison, innovations occurring since 1990 do serve to improve the removal efficiency of scrubbers.
Johnson, Daniel K.N. and David Popp, “Forced Out of the Closet: The Impact of the American Inventors Protection Act on the Timing of Patent Disclosure, RAND Journal of Economics, Spring 2003, 34(1), 96-112.
Beginning in November 2000, patent applications filed in the United States are disclosed after 18 months, rather than when the patent is granted. Using U.S. patent data from 1976-1996, we find that major inventions are most likely to be affected, as they take longer to go through the application process. We conclude with evidence that this change will result in faster knowledge diffusion.
Popp, David, “Induced Innovation and Energy Prices,” American Economic Review, March 2002, 92(1), 160-180.
I use U.S. patent data from 1970 to 1994 to estimate the effect of energy prices on energy-efficient innovations. Using patent citations to construct a measure of the usefulness of the existing base of scientific knowledge, I consider the effect of both demand-side factors, which spur innovative activity by increasing the value of new innovations, and supply-side factors, such as scientific advancements that make new innovations possible. I find that both energy prices and the quality of existing knowledge have strongly significant positive effects on innovation. Furthermore, I show that omitting the quality of knowledge adversely affects the estimation results.
Popp, David, “Altruism and the Demand for Environmental Quality,” Land Economics, August 2001, 77(3), 339-349.
This paper asks whether individuals consider the value future generations will receive from environmental quality when deciding what level of environmental protection to provide. Using data on life expectancy, I develop two tests for altruism towards future generations. One, a test for strong altruism, asks whether individual motives are purely altruistic when deciding to provide environmental quality. The second, a test for weak altruism, combines an individual’s concern for both self-interest and the interest of future generations. Using data from a Washington Post survey on environmental attitudes to implement the test, I find evidence of weak altruism.
- Data appendix to “Altruism and the Demand for Environmental Quality”
Popp, David, “The Effect of New Technology on Energy Consumption,” Resource and Energy Economics, July 2001, 23(3), 215-239.
This paper uses patent data to estimate the effect of new technologies on energy consumption. Matching energy patent counts to the industries using these patents, I create stocks of energy knowledge for 13 industries. Including the stocks in restricted variable cost functions, I estimate the median present value of long-run savings from a new patent to be over 14.5 million dollars. Combining these results with estimates of price-induced innovation, I conclude that two-thirds of the change in energy consumption with respect to a price change is due to simple price-induced factor substitution, while the remaining third results from induced innovation.
Nordhaus, William D. and David Popp, “What is the Value of Scientific Knowledge? An Application to Global Warming Using the PRICE Model,” The Energy Journal, January 1997, 18(1), 1-45.
Governments must cope with the enormous uncertainties about both future climate change as well as the costs and benefits of slowing climate change. This study analyses the value of improved information about a variety of geophysical and economic processes. The value of information is estimated using the “PRICE model” which is a probabilistic extension of earlier models of the economics of global warming. The study uses five different approaches to estimating the value of information about all uncertain parameters and about individual parameters. It is estimated that the value of early information is between $1 and $2 billion for each year that resolution of uncertainty is moved toward the present. We estimate that the most important uncertain variables are the damages of climate change and the costs of reducing greenhouse gas emissions. Resolving the uncertainties about these two parameters would contribute 75 percent of the value of improved knowledge.