New publication: Cap-and-trade policies and regional environmental innovation

Tim Becker and Sebastian Losacker, together with Sandro Montresor, have published their new article, "Cap-and-trade policies and regional environmental innovation: evidence from the EU Emissions Trading System" in the Journal of Economic Geography.

The paper examines whether more stringent regional cap-and-trade policies foster regional innovation in environmental technologies and whether these effects spill over to neighboring regions. The analysis is based on a novel regional dataset on the EU Emissions Trading System (EU ETS) covering the period 2005–2020.

The results show that higher regional ETS stringency is associated with increased environmental patenting. This relationship strengthens over time. The authors also identify interregional spillover effects, particularly through geographical proximity and trade relationships, but not through knowledge networks. The effect is weaker in regions that are already specialized in environmental technologies.

Overall, the findings demonstrate that cap-and-trade policies can serve not only as instruments for reducing emissions, but also as drivers of environmental innovation. At the same time, their innovation effects are spatially uneven. This highlights the importance of accounting for spatial spillovers and regional absorptive capacities when designing climate policy mixes and complementary innovation policies.

Sebastian Losacker presented and discussed the article and its key findings on February 11, 2026, at the RISIS Research Seminar (#53) hosted by the AIT Austrian Institute of Technology.

The article is published Open Access, and the dataset is available for download.