Innovation is the holy grail of climate policy. Without it, we are toast -- quite literally. Climate economists' efforts to quantify innovation, though, has more closely resembled something of a Monty Python goose chase than a deliberate pursuit. That elusive quest may have finally come to an end. A new study shows that Annex I countries that ratified Kyoto have had greater green tech innovation in the years after Kyoto than those that didn't ratify.
Two figures in the paper tell you pretty much all you need to know. The first, Figure 2, shows that the trend rate of patent filings appears to have risen for climate-related technologies relative to all technologies in recent years. The second, Figure 3, shows the divergence in the same period between Annex I countries that ratified Kyoto and the United States and Australia (yes, Australia ratified too, but much later).
So, climate policy causes innovation in green tech -- case closed.
Not quite: First, of course, the paper doesn't show direct causality. There are hints and some convincing stories to tell, but, as any Wikipedia reader by now knows, statistical correlation doesn't imply causality. More importantly, we may have an entirely different story altogether. It could conceivably be the case that Annex I Kyoto ratifiers (i.e. Europe & Japan) outpaced the United States and Australia in the growth of total patents over these last few years for reasons completely unrelated to Kyoto.
The United States still dominates the world in total patents, but Europe might be closing the gap. I know, I know, unlikely with those month-long summer vacations, but it's possible.
Not so: the authors went back to splice the data once more and disprove my suspicion. This figure shows that the share of green-tech patents in Europe and Japan increased relative to that in the United States and Australia.
That's pretty convincing evidence in my book.
The most important point, of course, is that green tech innovation doesn't just magically happen. It takes deliberate government policy to spur it: make low-carbon innovation pay, and get out of the way. There's plenty of entrepreneurs looking for the next big energy breakthrough -- and to make a buck in the meantime.
We've long known the success of the SO2 innovation story (heard of "acid rain" lately?). I believe this might be the first time we are seeing evidence of innovation in action in the carbon world.
