Innovation of energy technologies: The role of taxes
In this study for the DG Taxation and Customs Union, we have investigated the role of taxation of carbon and energy as a spur for innovation. In our study we have focused on the direct links between energy taxes and innovation, and the merits of taxation relative to innovation and R&D policies. Based on our empirical research we conclude that a substantial increase in energy taxation can drive forward a considerable increase in innovation. Furthermore, we find that tax induced innovation is significantly higher than the price induced innovation. The speed and size of innovation effects from energy/carbon taxes depend on a number of characteristics of the products and processes affected by the tax.