Creation and Adoption of Energy-related Innovations

One of the main goals of the Energy Strategy 2050 is the exploitation of the existing energy efficiency potentials, whereas the size of the efficiency potential strongly depends on the development and the adoption of energy-related innovations. Consequently, it is the objective of this project to improve our knowledge about the drivers and potentials of both the adoption and creation of energy-saving and more generally energy-related innovation. Our study will be based on firm-level information. Firms are not only the main source of energy-related innovation, but they are also responsible for a considerable share of the total energy consumption, which is larger than that of households. Accordingly, a better understanding of the adoption and innovation mechanisms within firms is important in order to develop efficient policy measures. More concretely, we will investigate in a first set of econometric models: (a) the main determinants of the adoption/diffusion of energy-related innovations based on technology diffusion theory including motives, obstacles and policy measures; (b) the link between technology adoption and environmental performance (e.g., CO2 reduction) as well as (c) the link between the adoption of energy-related technologies and firm performance. In a second set of models, we will then analyze: (d) the drivers of the generation of energy-related innovation and (e) the relationship between the generation of energy-related innovation and firm performance. The project is a collaboration between KOF (Swiss Economic Institute), WIFO (Austrian Institute of Economic Research) in Austria, and the ZEW (Center for European Economic Research) in Germany. It will be based on specific survey data, collected for a representative sample of firms in the three countries Austria, Germany, and Switzerland. In such a way the data will enable comparative analysis among the three countries involved and provide a significantly more elaborated picture of the adoption and innovation process with respect to energy-related technologies than it is usually found in the relevant literature. The country comparison is of particular interest for Switzerland, since the other two countries, Austria and Germany, are often perceived to be more advanced in their environmental policy. Thus, policy lessons may be learnt from relating the differences between the respective policies with our empirical findings from the micro data. Accordingly, our analyses will allow for a better understanding of the consequences of policy measures for the entire adoption process and its performance implications. In such a way, we contribute to improve evidence-based policy making in order to reach the goals of the energy strategy 2050. The additional knowledge about the mechanisms of dissemination of existing energy-related technologies as well as the processes of generation of new such technologies including knowledge about the potential effectiveness of policy measures would supply policy-makers with the appropriate information for a better implementation of measures needed to achieve the program goals but also for a better understanding of potential obstacles.

The recent Paris Agreement represents the most ambitious plan for transnational coordination to mitigate the perils of climate change thus far. At the same time doubts about its scope, lack of enforcement and the bottom-up approach of nationally determined contributions (NDCs) point towards its apparent limitations. Given the huge gap between the perceived need of transformation and the collective willingness to contribute to it, better knowledge about the impact of different instruments is of paramount importance to establish effective environmental policies. Based on a newly designed questionnaire sent to a representative sample of around 20,000 firms in Austria, Germany, and Switzerland, this project analysed the effectiveness of the current policy framework and highlights some important factors to improve the policy design. The survey produced a sample of 4,634 valid responses. In short, the results confirm that policy affects both the extensive and intensive margin of the adoption of green energy technologies (GETs), however, not uniformly and only by means of differentiated impacts of the various instruments (subsidies, taxes, standards and other quantity based regulations). In turn, the adoption of new GETs contributes significantly to improving energy efficiency and reducing carbon emissions, confirming its positive overall ecological impact. Finally, the findings suggest that the adoption of new GETs has a neutral impact on the competitiveness of the average firm. This finding contrasts with the traditional hypothesis of a negative trade-off between environmental regulations and competitiveness, but also casts doubt on Porters optimistic hypothesis of a general win-win relationship. However, a neutral impact on the competitiveness of the average firm is still encouraging news for more ambitous environmental policies to foster the transition and decoupling of economic growth from energy use. Furthermore, the analysis demonstrates how different instruments bring distinct strengths and weaknesses to the policy table. It supports theoretic rationales which postulate that a combination of tools is the most effective means to redirect technological change towards cleaner production. In other words, policy is likely to be most effective if it applies price-based instruments, such as public funding and taxes, together with quantity-based regulations, such as negotiated standards or tradeable permits. In practice, however, firms are most often affected by standards. On the one hand, this reflects the obvious practical relevance of detailed technical rules, but on the other hand it also points at likely welfare losses from the insufficient use of incentive-based tools.