Impact of a National Carbon Pricing Policy alongside the EU Emission Trading Scheme on Low-Carbon Technological Innovation: a Panel Event Study

Details

Supervisors

Candelon, Bertrand

Faculty

Louvain School of Management

Degree label

Master [120] : ingénieur de gestion, à finalité spécialisée

Abstract

This thesis investigates the impact of implementing a national carbon pricing policy on the development of low-carbon technological innovations in countries already subject to the European Union Emissions Trading Scheme (EU ETS). Utilizing a panel event study approach, the research examines whether the introduction of national carbon pricing regulation stimulates low-carbon innovation. The study further explores how variables such as GDP, R&D expenditure, government environmental spending, national carbon price, and the proportion of emissions covered by the EU ETS influence innovation outcomes. Empirical results demonstrate that national carbon pricing policies positively impact innovation before their introduction, shortly after, and in the medium term following their adoption. Additionally, an increase in emissions covered by the EU ETS correlates positively with innovation levels, whereas higher government environmental spending appears to have a negative effect. The findings suggest that countries with extensive emissions coverage under the EU ETS are more incentivized to innovate, while a lower carbon price can negatively affect innovation unless offset by high emissions coverage.