Accelerating energy innovation: Can energy efficiency policy make a difference?

Abstract

The objective of the first essay is to examine the impact of the voluntary environmental policy on technological innovation in household appliance firms. The key hypothesis is that firms participating in the ENERGY STAR program were more likely to innovate in response to the 1997 ENERGY STAR criteria update than firms that did not participate. Because participation in the voluntary environmental policy is not random, a time-varying instrument variable—a participation in the Green Light Program—is used to account for unobserved heterogeneity. NBER patent data from 1990 to 2003 related to the energy efficiency of household appliances is matched with COMPUSTAT to include firm-level financial information. A Poisson fixed effect model with an instrument variable estimator reveals significant evidence regarding the impact of ENERGY STAR on participating firms’ patents. The environmental innovation literature reveals a positive relationship between environmental policy and innovation. However, the impact of the domestic energy efficiency policy on foreign innovation is underexplored. Using global patent data from the European Patent Office World Patent Statistical Database, an identification comes from two quasi-experiments: the Top Runner Program in 1998 and the Energy Policy Act of 2005. We find strong evidence the domestic energy efficiency policy positively affects domestic patenting. In addition, the analysis provides strong evidence the domestic energy policy leads to technological advances in foreign patenting, especially by Japanese inventors. Moreover, we find strong evidence the domestic policy’s uncertainty negatively affects domestic light-emitting diode patenting, specifically among Japanese inventors. The third essay fills the gaps in cognitive process understanding of human behaviors between future gasoline price perception and the willingness to purchase hybrid vehicles. How consumers form future gasoline price beliefs and its impacts on decision making process in underexplored in literature. Using the monthly Michigan Survey of Consumers conducted in July 2008 to November 2008, we pool five cross sections and run a generalized linear model. We find statistically significant evidence that current and long-term future gasoline price perceptions affect the willingness to buy hybrid vehicles. This chapter also shows the long-term future gasoline price perceptions predict better than the short-term future gasoline price beliefs. Understanding the effect of gasoline price on the willingness to buy more fuel-efficient cars has an important policy implication for the gasoline tax and other economic incentives to internalize negative externalities.