Environmental Engineering Reference
In-Depth Information
of the process relies on innovation. Here we adopt an extensive interpretation of
price-induced effects, extending the framework to government intervention in an
attempt to control market prices. Indeed, it is worth noting that although the
nal
substitution stimulus is related to price, the latter can be divided into two compo-
nents referring to different innovation drivers. The
uencing the sub-
stitution effect often includes government market instruments such as taxes or
incentives, which we call the
nal price in
component. Apart from taxes or subsidies,
the rest of the price represents the pure market component, which is assumed to be
affected only by market forces and not by public intervention.
Many papers have tested the effectiveness of the price-inducement effect (see [
9
,
67
,
76
], among the others), and have found prices to play a signi
“
public
”
cant, positive role
in inducing input substitution through innovation, particularly over the long run. In
the speci
c sector of EE, few studies have tried to analyse the relationships between
prices and EE innovation. Jaffe and Stavins [
39
] focus their empirical analysis on
the adoption of technologies, comparing the effects of energy prices, building codes
and adoption subsidies on the average EE level in home construction in the US over
the period 1979
nd that energy taxes have a positive but relatively
small impact on technology dissemination, but that subsidies have a stronger
positive effect. By contrast, building code requirements (a form of direct regulation
by technology standards, measured by using dummy variables) are found to have
no effect. The paper by Newell et al. [
56
] is the only one that focuses specically on
home appliances. By evaluating the impact of energy prices and regulatory stan-
dards on the introduction of new home appliances (e.g. gas water heaters and air
conditioners) in the US between 1958 and 1993, it con
-
1988. They
rms the price-inducement
hypothesis,
nding that falling energy prices work against the development of
energy-ef
cient appliances. Noailly [
58
] is the most recent study, and the only one
related to EE innovation measured by patent data. It investigates the impact of
alternative environmental policy instruments (regulatory energy standards in
building codes, energy prices and speci
c governmental energy R&D expenditures)
on energy-ef
cient technological innovations in the building sector. The study
covers seven European countries over the period 1989
-
2004 and
nds that, for the
speci
c case of the building sector, regulatory standards have a greater impact on
innovation than energy prices and R&D support.
In our analysis, the price effect considered is the price-tax bundle calculated as
the ratio of the overall cost of energy taxation to the total cost of energy con-
sumption as follows:
P
3
n
¼1
tax
n
;
it
ener
cons
n
;
it
Price
tax bundle
it
¼
ð
2
Þ
P
3
n
¼
1
price
n
;
it
ener
cons
n
;
it
where
n
indexes diesel, electricity and gas. Price and tax rates are taken from IEA
Energy Prices and Taxes Statistics [
35
], while data on energy consumption are
taken from IEA Energy Balance Statistics [
34
]. All data refer strictly to the resi-
dential sector.
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