OCDE - Environmental Policy Design, Innovation and Efficiency Gains in Electricity Generation - Environment
This paper explores the relationship between environmental regulation, innovation, and
competitiveness, drawing upon a unique dataset on environmental regulations directed at combustion
plants, a global dataset of power plants, and a global dataset of ‘environmental’ patents. The analysis
is conducted in two stages. First, a nonparametric frontier analysis is implemented to estimate
efficiency scores, including a measure of technological innovation based on patent stocks. Second,
econometric methods are applied to analyse the role of policy stringency and policy design on
efficiency. Our estimation sample covers thermal power plant sectors in 20 countries from 1990 to
2009. The results show that the stringency of environmental regulations is a significant determinant of
productive efficiency with respect to pollutant emissions as well as fuel use. However, these effects
turn negative once the level of stringency leaps over a certain threshold. In addition, the paper
concludes that the positive effect of regulatory stringency can be diminished by a negative effect of
regulatory differentiation with measures which are differentiated across plant size and age having
negative consequences, and these effects are increasing over time. This finding is important given the
prevalence of size- and vintage-differentiated policies in many countries. Finally, it is found that
integrated approaches to environmental innovation are more likely to bring about efficiency
improvements than end-of-pipe technologies
This paper explores the relationship between environmental regulation, innovation, and
competitiveness, drawing upon a unique dataset on environmental regulations directed at combustion
plants, a global dataset of power plants, and a global dataset of ‘environmental’ patents. The analysis
is conducted in two stages. First, a nonparametric frontier analysis is implemented to estimate
efficiency scores, including a measure of technological innovation based on patent stocks. Second,
econometric methods are applied to analyse the role of policy stringency and policy design on
efficiency. Our estimation sample covers thermal power plant sectors in 20 countries from 1990 to
2009. The results show that the stringency of environmental regulations is a significant determinant of
productive efficiency with respect to pollutant emissions as well as fuel use. However, these effects
turn negative once the level of stringency leaps over a certain threshold. In addition, the paper
concludes that the positive effect of regulatory stringency can be diminished by a negative effect of
regulatory differentiation with measures which are differentiated across plant size and age having
negative consequences, and these effects are increasing over time. This finding is important given the
prevalence of size- and vintage-differentiated policies in many countries. Finally, it is found that
integrated approaches to environmental innovation are more likely to bring about efficiency
improvements than end-of-pipe technologies
