There is an ongoing discussion about the effectiveness of carbon pricing, with a strong division between optimists and pessimists. A recent review study by Lilliestam, Patt and Bersalli (2020) of the impact of carbon pricing on low-carbon innovation and deep carbonization concludes that there is no evidence for such an impact. We evaluate this study and identify various shortcomings of it, which together cast strong doubts on its main conclusion. Instead, we conclude, based on the studies reviewed by the authors and additional, overlooked literature, that carbon pricing has had a small but positive and significant effect on low-carbon innovation. Our evaluation provides lessons for undertaking a systematic and objective review of research on this topic. Since the main goal of carbon pricing is changing choices by firms and consumers that affect carbon emissions, we also point the reader towards recent evidence for the broader effectiveness of carbon pricing.
Bibliographical noteFunding Information:
This research was supported by European Research Council (ERC) Grant 741087 in EU-Horizon2020. I.S. acknowledges financial support from the Russian Science Foundation [RSF grant number 19-18-00262].
© 2021, The Author(s).
Copyright 2021 Elsevier B.V., All rights reserved.
- Carbon tax
- Emissions trading
- Energy price
- Induced innovation
- Literature review