Creating incentives for environmentally enhancing technological change: Lessons from 30 years of US energy technology policy

Due to the externalities associated with energy production and consumption, public policy is necessary to provide a stimulus for the development and d iffusion of more environmentally sound energy technologies. Based on an in- depth history of technological development for four electric power technolo gies, this paper draws lessons for the design of future policies to promote innovation in energy technologies. The technologies examined are: wind tur bines, solar photovoltaics, gas turbines, and atmospheric fluidized bed com bustion. The analysis considers both supply-push and demand-pull approaches for stimulating technological change. II concludes that government activit ies to promote environmentally enhancing technological development must inc lude both supply-push and demand-pull policies during the period spanning p recommercialization, first commercial use, and lead adoption. Furthermore, this analysis identifies five industry sector characteristics that influenc e the level of government effort necessary to support commercialization: th e size, strength, and risk of the private market niche; industry structure; firm financial capability: firm technological capability; and sources of i nnovation. (C) 2000 Elsevier Science Inc.