Induced innovation in energy technologies and systems: A review of evidence and potential implications for CO2 mitigation

Michael Grubb, Paul Drummond, Alexandra Poncia, Will McDowall, David Popp, Sascha Samadi, Cristina Penasco, Kenneth T. Gillingham, Sjak Smulders, Matthieu Glachant, Gavin Hassall, Emi Mizuno, Edward S. Rubin, Antoine Dechezleprêtre, Giulia Pavan

Research output: Contribution to journalReview articlepeer-review

1 Scopus citations

Abstract

We conduct a systematic and interdisciplinary review of empirical literature assessing evidence on induced innovation in energy and related technologies. We explore links between demand-drivers (both market-wide and targeted); indicators of innovation (principally, patents); and outcomes (cost reduction, efficiency, and multi-sector/macro consequences). We build on existing reviews in different fields and assess over 200 papers containing original data analysis. Papers linking drivers to patents, and indicators of cumulative capacity to cost reductions (experience curves), dominate the literature. The former does not directly link patents to outcomes; the latter does not directly test for the causal impact of on cost reductions. Diverse other literatures provide additional evidence concerning the links between deployment, innovation activities, and outcomes. We derive three main conclusions. (a) Demand-pull forces enhance patenting; econometric studies find positive impacts in industry, electricity and transport sectors in all but a few specific cases. This applies to all drivers-general energy prices, carbon prices, and targeted interventions that build markets. (b) Technology costs decline with cumulative investment for almost every technology studied across all time periods, when controlled for other factors. Numerous lines of evidence point to dominant causality from at-scale deployment (prior to self-sustaining diffusion) to cost reduction in this relationship. (c) Overall innovation is cumulative, multi-faceted, and self-reinforcing in its direction (path-dependent). We conclude with brief observations on implications for modelling and policy. In interpreting these results, we suggest distinguishing the economics of active deployment, from more passive diffusion processes, and draw the following implications. There is a role for policy diversity and experimentation, with evaluation of potential gains from innovation in the broadest sense. Consequently, endogenising innovation in large-scale models is important for deriving policy-relevant conclusions. Finally, seeking to relate quantitative economic evaluation to the qualitative socio-technical transitions literatures could be a fruitful area for future research.

Original languageEnglish (US)
Article number043007
JournalEnvironmental Research Letters
Volume16
Issue number4
DOIs
StatePublished - Apr 2021

Keywords

  • COmitigation costs
  • Directed technological change
  • Endogenous technological change
  • Energy innovation
  • Induced innovation
  • Innovation policy
  • Learning by doing

ASJC Scopus subject areas

  • Renewable Energy, Sustainability and the Environment
  • Environmental Science(all)
  • Public Health, Environmental and Occupational Health

Fingerprint Dive into the research topics of 'Induced innovation in energy technologies and systems: A review of evidence and potential implications for CO<sub>2</sub> mitigation'. Together they form a unique fingerprint.

Cite this