Policy induced technological change : Productivity and innovation effects in biomass-using industry and energy generation

Abstract: The main objective of this thesis is to investigate the impact of public environmental policy on technological change in the biomass-using industry and energy generation. The thesis contains an introductory part followed by the empirical investigation which is divided into two self-contained articles.One of the determinants of technological change is research and innovative activities. Article I studies whether renewable energy support schemes directed towards the production and usage of bioenergy have affected innovation with respect to bioenergy technology. A negative binominal count data model is employed analysing a panel consisting of 14 OECD countries over the years 1978–2009. As a proxy for innovation, bioenergy patents counts are used as the dependent variable explained by a set of policy variables as well as other determinants of innovation. The renewable energy policies investigated are feedin tariffs (FIT), renewable energy certificates (REC) and public investment support schemes. The results indicate that feed-in tariffs have had a positive impact on innovation but renewable energy certificates have not. The result regarding investment support schemes is ambiguous since the dummy variable representing strong investment policies was statistically significant whereas the continuous variable for investment support schemes was not. Furthermore, the regressions suggest that market factors such as total energy consumption and electricity prices are important drivers of innovation within bioenergy technology.A concept sometimes used in order to empirically investigate technological change is productivity. Article II aims to disentangle whether environmental regulation has affected the productivity development in the pulp and paper industry through its impact on technological change. A dynamic panel data approach is selected analysing a sample consisting of the pulp and paper industry in eight European countries. Industry total factor productivity for the period 1993–2009 is used as the dependent variable and is explained by the intensity of environmental regulation and a number of other determinants of productivity. The results indicate that regulation of nitrogen oxides is associated with productivity improvements with a one-year lag, whereas regulations regarding sulphur dioxide and carbon dioxide have not had any statistically significant impact. However, since increased regulation, as displayed by the chosen proxy, not only mirrors environmental regulation stringency, but also investments in new capital and learning which coincide with lower emissions, the positive result does not per see imply that the maximum growth has been reached. The results could therefore not be viewed as a proof of the so-called strong Porter hypothesis which postulates that stringent well-designed environmental regulations increase productivity growth compared to a no-policy scenario.