Emissions trading programmes have grown in number and scope over the last forty years, and in the last decade they have become a centrepiece of global climate change policy. Emissions trading can in principle offer policy makers a flexible mechanism to reduce harmful emissions - polluters can choose their own emissions abatement strategy, and the trading mechanism can reduce overall abatement cost by flexibly redistributing emissions permits to those polluters that find abatement costliest. In the context of climate policy, though, it is the potential to stimulate innovation and technological change that is most alluring. Without transforming production, the quantity of emissions abatement will be insufficient; without technological change, the cost will be prohibitive. Emissions trading programmes are clearly not the only policy that affect technological change, but the extent to which these programmes encourage low-carbon technological change is perhaps still the most important criterion on which to judge their success or failure.
Advances in monitoring, greater data availability, and improvements in statistical and computational techniques have only recently made it possible to systematically study the impacts of emissions trading on a large scale. In recent years, researchers have studied the impact of emissions trading programmes on company profitability, on employment, and on capital investment. This thesis aims to advance this research programme by contributing a systematic analysis of how emissions trading affects technological change.
This thesis comprises four essays. The first essay examines past emissions trading programmes and the extent to which these experiences provide guidance on the ability of emissions trading programmes to affect low-carbon technological change in the future. The second essay investigates the degree to which economic theory can help constrain the range of expected impacts in a world of at east moderate complexity. The third and fourth essays present the first comprehensive empirical assessment of how the world's largest emissions trading programme, the EU Emissions Trading Scheme, has affected technological change, measured in terms of carbon dioxide intensity output, research and development, and patenting
