June 15, 2021

Wittstock & Martin on Innovation to Fight Climate Change

It has now become a platitude: technological innovation is the key to human prosperity. COVID-19 has demonstrated this once again: global research networks and swashbuckling pharmaceutical companies (incentivized, regulated, and nudged along by governments, of course) gave us several vaccines in record time—most of them using entirely new techniques such as mRNA technologies.

What about mitigating climate change? When folks brainstorm about how to address this problem, government policy usually takes pride of place. Carbon taxes, outright bans, or large-scale public investment in energy alternatives, for example.

What role does innovation by private actors play? In a new episode of the UW Political Economy Podcast, Nicolas Wittstock discussed this topic with Ralf Martin, an economist at Imperial College of London Business School. Martin, together with Philippe Aghion, Roland Benabou, and Alexandra Roulet, show that consumers’ environmental concerns have induced firms in the automobile sector to engage in “clean” innovation. But how much does market competition move the needle on reducing climate change? Martin and his coauthors calculate that its impact has been equivalent to a 40% increase in worldwide fuel prices!

Nicolas and Martin also broached the status of the United Kingdom’s environmental policy after Brexit and the Covid pandemic. They discuss how it fits in with an international trend towards national innovation strategies centered on investments in renewable energy and fostering a highly educated labor force. They also chat about international supply chains, de-industrialization, and technology transfer to China.