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The Impact of Energy Prices on Green Innovation

Based on patent data and industry specific energy prices for 18 OECD countries over 30 years we investigate on an industry level the impact of energy prices on green innovation activities. Our econometric models show that energy prices and green innovation activities are positively related and that energy prices have a significantly positive impact on the ratio of green innovations to non-green innovations. More concretely, our main model shows that a 10% increase of the average energy prices over the previous five years results in a 3.4% and 4.8% increase of the number of green innovations and the ratio of green innovations to non-green innovations, respectively. We also find that the impact of energy prices increases with an increasing lag between energy prices and innovation activities. Robustness tests confirm the main results.

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Energy Specializations: Electricity – Markets and Prices ; Renewables – Policy and Regulation; Renewables – R&D and Emerging Technologies; Energy and the Economy; Electricity – Generation Technologies; Energy and the Environment – Environmental Market Design

JEL Codes: Q55: Environmental Economics: Technological Innovation, Q41: Energy: Demand and Supply; Prices, Q40: Energy: General, Q58: Environmental Economics: Government Policy

Keywords: Innovation, Environment, Energy prices

DOI: 10.5547/01956574.37.1.mley

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Published in Volume 37, Number 1 of the bi-monthly journal of the IAEE's Energy Economics Education Foundation.