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Carbon prices and incentives for technological development.
Tommy Lundgren1, Per-Olov Marklund2, Eva Samakovlis3
1CERE, Centre for Environmental and Resource Economics, Umeå University, 901 87 Umeå, Sweden; SLU, Swedish University of Agricultural Sciences, 901 83 Umeå, Sweden.
Journal of Environmental Management
|January 7, 2015
Summary
Climate policies like the Swedish CO2 tax and EU ETS had a minimal, potentially negative, impact on technological development in the pulp and paper industry. Higher carbon prices are needed to incentivize innovation.
Area of Science:
- Environmental Economics
- Industrial Ecology
- Technological Innovation
Background:
- Concerns exist regarding the efficacy of current carbon prices in driving technological advancement.
- The Swedish carbon dioxide (CO2) tax and the EU Emissions Trading System (EU ETS) are key climate policies.
- The pulp and paper industry is a significant energy consumer and emitter.
Purpose of the Study:
- To empirically analyze the impact of the Swedish CO2 tax and EU ETS on technological development in the Swedish pulp and paper industry.
- To assess whether existing carbon prices provide sufficient incentives for innovation.
- To compare the impact of climate policies with fossil fuel prices on productivity.
Main Methods:
- Calculation of a Luenberger total factor productivity (TFP) indicator.
- Utilizing data envelopment analysis (DEA).
- Empirical analysis of the Swedish pulp and paper industry from 1998-2008.
Main Results:
- Climate policies (CO2 tax and EU ETS) demonstrated a modest, and potentially negative, impact on technological development.
- Fossil fuel prices appeared to provide more significant incentives for technological development.
- The carbon prices implemented were likely too low to stimulate substantial innovation.
Conclusions:
- Current carbon prices from the CO2 tax and EU ETS are insufficient to drive significant technological development in the pulp and paper sector.
- Policy design must ensure sufficiently high carbon prices to effectively incentivize climate change mitigation and innovation.
- Findings are applicable internationally, highlighting the need for robust carbon pricing mechanisms.
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