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Providing innovation incentives for the green transition

Author

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  • Armin Schmutzler

Abstract

By affecting prices and thereby market shares of green and brown firms, product innovations and process innovations influence industry emissions even when they do not directly affect the emission intensity of the innovating firm. Using a differentiated two-stage duopoly, this paper therefore analyzes the effects of environmental policy on such innovations, and it asks how these effects differ from each other and from those of environmental innovations that directly reduce the emission intensity. The paper investigates the determinants of R&D investments, showing in particular that incentives for certain types of potentially beneficial innovations may be negative. Moreover, it analyzes how suitable policies can foster green innovation.

Suggested Citation

  • Armin Schmutzler, 2025. "Providing innovation incentives for the green transition," ECON - Working Papers 462, Department of Economics - University of Zurich.
    • Handle: RePEc:zur:econwp:462
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    File URL: https://www.zora.uzh.ch/id/eprint/266482/1/econwp462.pdf
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    References listed on IDEAS

    as
    1. Bansal, Sangeeta, 2008. "Choice and design of regulatory instruments in the presence of green consumers," Resource and Energy Economics, Elsevier, vol. 30(3), pages 345-368, August.
    2. Rogge, Karoline S. & Schneider, Malte & Hoffmann, Volker H., 2011. "The innovation impact of the EU Emission Trading System -- Findings of company case studies in the German power sector," Ecological Economics, Elsevier, vol. 70(3), pages 513-523, January.
    3. repec:bla:scandj:v:97:y:1995:i:3:p:411-20 is not listed on IDEAS
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    More about this item

    Keywords

    Innovation; environmental policy; imperfect competition;
    All these keywords.

    JEL classification:

    • Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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