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Environmental Economics Seminar: Adapting to New Information when Driving Environmental Innovation: Lessons from California Vehicle Policies

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Date(s): November 5, 2009, 9:30 to 11:00 am

Location: Room 4144 EPA West, 1301 Constitution Ave., NW

Presenter: Margaret Taylor (Goldman School of Public Policy; University of California,at Berkeley)

Description: Locking emissions targets into a long-term regulatory program, such as a cap-and-trade program (CTP) for carbon mitigation, poses certain tradeoffs to policy-makers interested in promoting the invention and adoption of new environmental (or "clean") technologies. On the one hand, long-term targets provide a degree of certainty that investments in clean technologies today will pay off at some point in the future, regardless of the value of emissions allowances in the short term. On the other hand, a future could be imagined in which new information could significantly shift the calculus of the benefits and costs of the original targets and the directions in environmental innovation which these targets had inspired. A variety of studies have highlighted issues regarding the accuracy and credibility of technology projections in the context of “technology-forcing regulation,” given profit motivations and information asymmetry between technology developers and the public sector. But the implications for innovation of periodic government actions that adapt to technological realities and potentials over a long time period have been unexplored, in part because of the dearth of program examples. The most significant of the few existing examples is probably the long-running California Low-Emission Vehicle (LEV) program and its subordinate Zero-Emission Vehicle (ZEV) program. This paper explores the inventive activity and innovative outcomes that occurred in conjunction with the LEV/ZEV program and the potential implications of the results for adaptive technology-forcing environmental policy. Specifically, the paper considers cost, performance, and patenting data for four relevant vehicle technologies – automotive emissions controls (AEC), battery-electric vehicles (BEV), hybrid-electric vehicles (HEV), and polymer-electrolyte fuel-cell vehicles (FCV).


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