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Cited by 23Climate Change Policy and EconomicsEnergy, Environment, Economic GrowthEnvironmental Sustainability in Business

The impact of emissions trading systems on technological innovation for climate change mitigation: a systematic review

Open access
Chen, Zihong, Brockway, Paul E., Few, Sheridan, Paavola, Jouni·2025·Climate Policy
DOI 10.1080/14693062.2024.2443464
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Abstract

Addressing the increasingly urgent climate crisis requires a profound transformation of traditional high-emission technologies. Emissions trading systems (ETSs), as a typical market-based environmental policy instrument, are intended to incentivise technological innovation for climate change mitigation (TICCM). However, reviews of the evidence for this relationship are often methodologically unsystematic, analytically limited and vary in conclusions. In response, we establish a rigorous and transparent procedure to systematically review and synthesise evidence from 78 selected papers published between 2001 and 2023 on the impact of ETSs on TICCM. Our findings indicate that the European Union ETS (EU ETS) and China ETS (CN ETS) pilots exert positive and statistically significant impacts by incentivising technological investment, patenting, and the adoption of new technologies, despite some limited evidence of null or negative impacts. The heterogeneity of incentive impact in different industries and regions is the primary cause of divergent conclusions in the literature. Variations in the study periods and the subjects investigated account for part of the observed discrepancies. Although the incentive effect is significant, its extent is moderate and potentially weaker for long-term and radical TICCM impacts. The incentive effect is largely limited by insufficient stringency and high uncertainty of the ETSs. Coordinated efforts to address these limitations are crucial for bolstering the innovation incentives from the ETSs. Lastly, evidence of the impact of ETSs on TICCM remains incomplete. The limited focus on heterogeneity across industries, regions, and technologies, along with the lack of evaluation of recent incentive effectiveness, restricts a comprehensive understanding of ETS incentive effectiveness.Key policy insights The European Union ETS (EU ETS) and China ETS (CN ETS) pilots have generally provided positive and statistically significant incentives for multiple stages of technological innovation for climate change mitigation (TICCM).The incentives from the EU ETS and CN ETS pilots for TICCM remain moderate. Achieving climate goals will require enhancing the effectiveness of ETS-driven innovation incentives.The effectiveness of ETS incentives varies across regions and sectors. Sector- or region-specific adjustments are necessary to broaden the impact of these incentives.Collaboratively enhancing the stringency and reducing the uncertainty of the ETSs is a critical avenue for boosting incentives for TICCM.

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  • Technological change is necessary to address climate change without compromising economic growth.

    “Technological change is necessary to address climate change without compromising economic growth.”

    From The Impact of Carbon Pricing on Corporate Sustainability: Evidence From the European Union (2026) · cites this paper as Chen et al. 2024

    The paper says that addressing the climate crisis requires transforming high-emission technologies (Abstract, p. 2), supporting the technological-change part of the claim. Its discussion of innovation and climate goals (section 4.1, p. 13) does not establish that this can be done without compromising economic growth. (LLM, conf=0.82)

    Experimental — accuracy not yet measured

  • Previous studies document the limited effects of corporate environmental innovation on GHG emissions.

    “previous studies (Chen et al. 2024; Rogge 2016; Teixidó et al. 2019), which document the limited effects of corporate environmental innovation on GHG emissions.”

    From The Impact of Carbon Pricing on Corporate Sustainability: Evidence From the European Union (2026) · cites this paper as Chen et al. 2024

    Section 4.1 (p. 13) says the effect of emissions trading systems on technological innovation is limited or moderate. That is the reverse of the claimed relationship: it does not assess whether corporate environmental innovation has limited effects on GHG emissions. Searches for innovation’s effects on emissions found no passage addressing that claim. (LLM, conf=0.76)

    Experimental — accuracy not yet measured

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Cited by

Sorted by citations

Authors
Chen, Z., Brockway, P. E., Few, S., & Paavola, J.
Affiliations
University of Leeds (GB)
Corresponding author
Chen, Zihong
ORCID
Venue
Climate Policy
Publisher
Informa UK Limited
Published
2024-12-22
Volume
25
Issue
8
Pages
1293-1309
ISSN
  • 1469-3062 (ISSN-L)
  • 1752-7457
DOI
10.1080/14693062.2024.2443464
OpenAlex
W4405695726
Cited by
23
References
6
Citations by year
2026: 16 · 2025: 7
FWCI
2.54
Type
journal article
Language
en
Open access
Licence
Locations
  • Climate Policy (publishedVersion, cc-by)
  • White Rose Research Online (University of Leeds, The University of Sheffield, University of York) (submittedVersion)
Funders
  • China Scholarship Council-University of Leeds Scholarship (202306040026)
  • UK Research Council under EPSRC Fellowship (EP/R024254/1)
  • UK Economic and Social Research Council (ES/K006576/1)
  • Centre for Climate Change Economics and Policy
Topics
  • Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Climate Change Policy and Economics
  • Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Energy, Environment, Economic Growth
  • Social Sciences › Business, Management and Accounting › Marketing › Environmental Sustainability in Business
Keywords
emissions trading system, technological innovation, climate change mitigation, innovation incentives, patenting, technology adoption, market-based environmental policy, policy stringency, policy uncertainty, sectoral heterogeneity

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