Low-carbon innovation has risen in Europe, but the EU’s Emissions Trading Scheme may not be the main factor in this growth.

The EU’s Emissions Trading Scheme (EU ETS) was launched in 2005 as a major part of Europe’s strategy for tackling climate change. As Raphael Calel and Antoine Dechezlepretre write, at its launch, there were fears that the scheme would not offer sufficient incentives to encourage research in low carbon technologies. Based on an analysis of European companies before and after 2005, they find that low carbon innovation has increased substantially, but that this increase cannot be accounted for entirely by the launch of the scheme