Renewable Energy Promotion: Usual Claims and Empirical Evidence - Green Energy and Efficiency: An Economic Perspective - page 332

Fig. 1 Degrees of maturity of renewable electricity technologies and appropriate support
instruments. Source Adapted from IEA [ 40 ]

the innovation process, i.e., for technologies which have passed demonstration but
are in the precommercialisation stage, and even in the initial phase of commer-
cialization, and for which a large cost reduction potential with increased diffusion
exists. Therefore, the speci

c characteristics of the technologies have to be taken into
account, i.e., their maturity level, costs, potentials for cost reductions and main
sources of technological change (i.e., whether R&D or learning effects from
deployment dominate).
Of course, it could be argued that a carbon price can promote the development
and diffusion of technologies with different maturity levels. However, this statement
would not stand empirical scrutiny. The empirical literature is quite clear in this
regard. It shows that the impact of the carbon price in the European Union Emis-
sions Trading Scheme (EU ETS) on radical innovation is likely to be very limited
[ 23

- 29 ] also show that the US Acid Rain program did not encourage …” also show

that the US Acid Rain program did not encourage signi cant innovation. Taylor

et al. [ 29 ] did not nd evidence that the ETS within the Acid Rain program

promoted innovation in a more effective manner than other instruments. Malueg
[ 30 ] and Driesen [ 31 ] have criticized the common argument that emissions trading
schemes promote innovation to a greater extent than other instruments. They claim
that, while potential sellers of permits (i.e., those with the lowest abatement costs)
have an incentive to innovate in order to sell permits and earn a pro

t, an emissions
trading scheme reduces the incentive to innovate compared to standard regulation
for those polluters with high abatement costs. Under traditional regulation these

rms would have an incentive to innovate in order to comply with regulation.
Under an ETS, this incentive would be lost since they just would buy the permits.