Common Tragedies

Thoughts on Environmental Economics

Kyoto and climate-friendly patents

Posted by Evan Herrnstadt on February 6, 2009

Gernot Wagner over at EnvEcon does a nice job outlining a very interesting paper I was too lazy busy to post on.  It basically looks at patent rates for climate-related technologies as a share of total innovation, and compares it across countries based on their Kyoto ratification history (EU + Japan vs. US + Australia).  The authors (Antoine Dechezleprêtre, Matthieu Glachant, Ivan Hascic, Nick Johnstone, and Yann Ménière) find that Annex I Kyoto-ratifying nations saw climate-friendly innovation at rates higher than that of Annex I nations that did not ratify (or ratified late, i.e. Australia).  Gernot is rightly cautious to claim causation — patent activity could easily be endogenous due to pre-existing/shifting tastes for green technology.  I’d love to see a difference-in-differences analysis, though that would probably require more data than is available, as well as a pretty sophisitcated lag structure given the delayed nature of patent activity.  This figure is pretty convincing though:

graph

Still, a similar endogeneity claim could be made — perhaps the ratification of Kyoto reflected changing environmental tastes in those countries, which could also lead to more green patenting.  At any rate, this is valuable analysis, and Gernot sums it up nicely here:

The most important point, of course, is that green tech innovation doesn’t just magically happen. It takes deliberate government policy to spur it: make low-carbon innovation pay, and get out of the way. There’s plenty of entrepreneurs looking for the next big energy breakthrough — and to make a buck in the meantime.

Indeed, although we shouldn’t ignore the value of directly subsidizing basic energy research.

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