This Misum Academic Insight is based on the research article “Can Environmental Policy Encourage Technical Change? Emissions Taxes and R&D Investment in Polluting Firms” published in The Review of Financial Studies. The paper was ‘highly recommended’ by the Financial Times in their Academic research award: tipping point for action.

Policies that support cleaner production technologies can lower climate change risks and environmental problems without hurting the economy in the long run. However, there is limited evidence on how these policies motivate companies to invest in these technologies. This study examines the influence of emission taxes on technology spending in highly polluting firms, focusing on sulfur oxide (SOx) emissions and research and development (R&D) investment. The findings show that higher SOx taxes significantly increase firm-level R&D spending in sectors with dirtier production technologies.

Read the Misum Academic Insight here.

Authors

Christian Thomann, Associate Professor at KTH and Misum affiliated researcher

Gustav Martinsson, Associate Professor at Stockholm University and Misum affiliated researcher

James Brown, Professor at Ivy College of Business, Iowa State University