Cap-and-trade policies and regional environmental innovation: evidence from the EU Emissions Trading System
Abstract
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.
Fields of Study & Subjects
Energy
Environment
Economic Growth
Climate Change Policy and Economics
Global trade and economics
Publication details
- Journal / source
- Journal of Economic Geography
- Publisher
- Oxford University Press (OUP)
- Volume
- 26
- Issue
- 5
- Pages
- 705-732
- Publication date
- 7 January 2026
- Language
- EN