Renewable Energy Policies and Technological Innovation: Evidence Based on Patent Counts

This paper examines the effect of environmental policies on technological innovation in the specific case of renewable energy. The analysis is conducted using patent data on a panel of 25 countries over the period 1978-2003. We find that public policy plays a significant role in determining patent applications. Different types of policy instruments are effective for different renewable energy sources. Broad-based policies, such as tradable energy certificates, are more likely to induce innovation on technologies that are close to competitive with fossil fuels. More targeted subsidies, such as feed-in tariffs, are needed to induce innovation on more costly energy technologies, such as solar power.