Literature Review of Recent Trends and Future Prospects for Innovation in Climate Change Mitigation

................................................................................................................................. 3 RÉSUMÉ ....................................................................................................................................... 4 NOTE FROM THE SECRETARIAT ........................................................................................... 5 INTRODUCTION ......................................................................................................................... 7 KEY ISSUES ASSOCIATED WITH DEVELOPMENT AND ADOPTION OF TECHNOLOGIES THAT MITIGATE CLIMATE CHANGE .................................................................................... 9 Negative Externalities of Climate Change ................................................................................. 9 Knowledge Spillovers .............................................................................................................. 10 The Scale of Adoption ............................................................................................................. 10 Path Dependence ..................................................................................................................... 10 Principal-Agent Problems ........................................................................................................ 10 Behavioral Change ................................................................................................................... 11 LITERATURE ON INNOVATION ........................................................................................... 12 Induced Innovation .................................................................................................................. 12 The Impacts of Technological Change .................................................................................... 18 LITERATURE ON DIFFUSION ................................................................................................ 23 Diffusion of Environmental Technologies within Countries ................................................... 23 Diffusion Across Countries ..................................................................................................... 25 LITERATURE ON TECHNOLOGY IN AGGREGATE ENERGY-ENVIRONMENT MODELS 28 Direct Price-Induced Technological Change ........................................................................... 28 R&D-Induced Technological Change ..................................................................................... 29 Learning-Induced Technological Change ................................................................................ 32 LITERATURE ON ENVIRONMENTAL AND TECHNOLOGY POLICY ............................. 34 CONCLUSIONS ......................................................................................................................... 37 REFERENCES ............................................................................................................................ 42