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OECD Study Finds Higher Fossil Fuel Prices Stimulate Renewable Energy Technology Innovation

OECD14 September 2012: A new working paper by the Organisation for Economic Co-operation and Development (OECD), titled "The Determinants of Invention in Electricity Generation Technologies: A Patent Data Analysis," studies the effect of fossil fuel prices on technological invention and finds positive impacts on renewable energy technologies. 

The paper uses patent data for 11 OECD countries between 1978 and 2008 to analyze the determinants of invention in efficiency-enhancing electricity generation technologies that potentially can facilitate climate change mitigation efforts. The paper focuses specifically on the role of fossil fuel prices, which are used to examine the effect that price mechanisms such as emissions trading and carbon taxes might have on invention in the electricity generation sector.

The paper finds that the effect of fossil fuel prices varies according to the type of technology. The results show that invention in renewable energy technologies increases as fossil fuel prices increase, while for fossil fuel-based technologies the effect is initially positive yet decreases as fossil fuel prices continue to rise. The paper concludes that price mechanisms such as emissions trading and carbon taxes might lead to a change in the direction of innovation towards low-carbon technologies. [Publication: The Determinants of Invention in Electricity Generation Technologies: A Patent Data Analysis]