Patent protection and the transition to clean technology | Isabel Hovdahl

Isabel Hovdahl will be discussing the paper Patent protection and the transition to clean technology

Abstract: 

It has proven to be a challenging task for policymakers to implement sufficiently high carbon taxes and public funding of research to induce the transition to clean technology. This calls for the exploration of alternative policy tools. In this context, this paper analyzes the use of patent protection as a new policy tool to help induce the transition to clean technology. It has been argued that patent protection works as a barrier to the diffusion of clean technology, and that clean technology should therefore be exempt from patent protection. This argument, however, does not consider the role of patent protection in incentivizing innovation. We therefore propose that to induce more clean innovation, it is dirty technology that should be exempt from patent protection. We explore this novel idea in a in a general equilibrium model with directed technical change, and where traditional environmental policy is constrained. We find that removing patent protection on dirty technology can in fact help foster the transition to clean technology, despite the increase in demand for dirty technology in the short-run. In addition, we find potentially large welfare gains from using patent protection as a policy tool when traditional environmental policy is constrained.

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