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An empirical analysis on the relationship between emissions trading system and R&D investment

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  • Emiko Inoue

Abstract

Innovation is now expected to play an important role to overcome difficult issues of climate change more than ever. To examine how to induce innovation, the relationship between environmental policy and innovation has been focused on. Still few researches, however, have examined the impact of the EU emission trading scheme on innovation based on econometric analysis. This study scrutinises how corporate responses towards the EU ETS influence R&D investments of EU major corporations. Using firm-level panel data, which is constructed based on the data of corporate responses to the Carbon Disclosure Project, EU Industrial R&D Investment Scoreboard, and corporations’ CSR reports, I estimate two dynamic panel models using system GMM estimator. Endogeneity issue is addressed in these models. The results show that corporations which have a policy or a strategy to comply with the EU ETS or to react proactively before being regulated by the EU ETS are more likely to encourage R&D investment. The process of reacting towards the EU ETS may provide an opportunity for corporations to recognise the importance of R&D investment for their future strategy.

Suggested Citation

  • Emiko Inoue, 2015. "An empirical analysis on the relationship between emissions trading system and R&D investment," Discussion papers e-15-008, Graduate School of Economics , Kyoto University.
    • Handle: RePEc:kue:epaper:e-15-008
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    Keywords

    Climate change; EU ETS; R&D investment;
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