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Do Public Subsidy Schemes Foster Innovation and Competitiveness in Energy-Intensive Industries?

Author

Listed:
  • Koski, Heli
  • Wang, Maria

Abstract

This study evaluates the impacts of public subsidies on firms in energy-intensive industries, focusing on R&D subsidies and compensation subsidies. Using firm-level data from Finnish energy-intensive industries between 2010 and 2022, it examines how these subsidies influence firm competitiveness and innovation outcomes. Compensation subsidies, designed to alleviate the additional electricity costs imposed by the EU Emissions Trading Scheme (ETS) on firms operating in certain energy-intensive industries, and to enhance their international competitiveness show no significant effects on employment, value added, or labor productivity. R&D subsidies, instead, demonstrate a substantial positive impact on innovation. Specifically, R&D subsidies significantly increase the citation stocks of climate change mitigation technology patents filed with the United States Patent and Trademark Office (USPTO). Total patent citation stocks associated with the European Patent Office (EPO) and USPTO also show statistically significant growth.

Suggested Citation

  • Koski, Heli & Wang, Maria, 2025. "Do Public Subsidy Schemes Foster Innovation and Competitiveness in Energy-Intensive Industries?," ETLA Working Papers 125, The Research Institute of the Finnish Economy.
    • Handle: RePEc:rif:wpaper:125
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    More about this item

    Keywords

    Firm subsidy; R&D subsidies; EU ETS; Competitiveness; Green innovation; Patents;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • L52 - Industrial Organization - - Regulation and Industrial Policy - - - Industrial Policy; Sectoral Planning Methods
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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