Work

Cap-and-trade policies and regional environmental innovation: evidence from the EU Emissions Trading System

Year: 2026

Type: article

Abstract: We investigate whether more regionally stringent cap-and-trade (C&T) policies induce regional innovation in environmental technologies and whether this effect spills over to proximate regions. Compiling a novel regional dataset, we test this argument for the EU Emissions Trading System (EU ETS) over the period 2005–2020. We find evidence of an intra-regional spillover effect, which is weaker in regions specialized in environmental technologies. We also identify inter-regional spillovers through spatial proximity and trade relationships, but not via knowledge networks. Instrumenting C&T exposure with a Bartik IV supports a causal interpretation of our estimates.

Source: Journal of Economic Geography

DOI: 10.1093/jeg/lbag002

Authors: Tim Becker, Sandro Montresor, Sebastian Losacker

Institutions: Justus-Liebig-Universität Gießen, University of Trento, Lund University

Language: English

Topic: Climate Change Policy and Economics

Subfield: Economics and Econometrics

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDGs: Industry, innovation and infrastructure, Climate action

Open Access status: hybrid

Estimated APC paid: $4,638