We analyze the role of electricity storage for technological innovations in electricity generation. We propose a directed technological change model of the electricity sector, where innovative firms develop better electricity storage solutions, which affect not only the relative competitiveness between renewable and nonrenewable electricity sources but also the ease with which they can be substituted. Using a global firm-level data set of electricity patents from 1963 to 2011, we empirically analyze the determinants of innovation in electricity generation, and the role of storage in directing innovation. Our results show that electricity storage increases innovation not only in renewables but also in conventional technologies. This implies that efforts to increase innovation in storage can benefit conventional, fossil fuel-fired electricity plants as well as increasing the use of renewable electricity.

ABSTRACT. Adaptation costs to climate change vary widely across countries, especially between developed and developing countries. Adaptation costs also influence a country's decision to abate and join international environmental agreements (IEAs). In this paper, the authors study how these cost differences affect participation incentives. Their model identifies two channels through which adaptation affects free-riding incentives: carbon leakage and cost asymmetry in adaptation. In contrast with the common view, the authors find that the presence of adaptation is not necessarily an impediment to cooperation on abatement. They also present conditions under which adaptation can strengthen or weaken free-riding incentives. The results serve as a cautionary tale to policy makers and suggest that policies directed at reducing carbon leakage and/or cost differences between developed and developing countries may also affect the success and failure of IEAs.

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