Estimating Technological Gains and Losses from Environmental Regulation

Is uncertainty about the impact of future environmental policies holding back the implementation of more ambitious climate regulations? Estimating the technological costs and benefits of implementing environmental policies could help us reduce the uncertainty about future policies and expedite the sustainability transition. This study aims to quantify the technological costs and benefits from an environmental regulation, employing a novel method to study the impact of an international environmental agreement (IEA). The focus is on the Kigali Amendment to the Montreal Protocol, signed in 2016, which targets the phasing down and out of hydrofluorocarbons (HFCs) – greenhouse gases with a very high global warming potential. Using a self-constructed dataset of patents citing regulated (dirty) chemicals and their clean substitutes as well as other similar patents not citing them, the study exploits the differences in patent renewal behavior between these three groups to estimate two structural models. This estimation allows to compute the aggregated average private monetary gains and losses due to the environmental regulation. The IEA engendered little technology-related losses while producing substantial gains.

Publication
Roger, Albert (2023). Estimating Technological Gains and Losses from Environmental Regulation. Working Paper. Available at Github