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This paper proposes a measurement framework that explicitly accounts for the role of natural capital in productivity measurement. It is applied to aggregate economy data from the OECD Productivity Database, with natural capital data from the World Bank. It is shown that the direction of the adjustment to productivity growth depends on the rate of change of natural capital extraction relative to the rate of change of other inputs. The extended framework also makes the contribution of natural capital to economic growth explicit. This can be useful for countries relying on non-renewable resources to better understand the need to develop other sources of growth-human or productive capital-to prepare for times of scarcer resource endowments. The framework can readily be applied to more encompassing natural capital data, once it becomes available.JEL Codes: D24, Q56, Q50

The economic effects of environmental policies are of central interest to policymakers. The traditional approach sees environmental policies as a burden on economic activity, at least in the short to medium term, as they raise costs without increasing output and restrict the set of production technologies and outputs. At the same time, the Porter Hypothesis claims that well-designed environmental policies can provide a "free lunch" -encouraging innovation, bringing about gains in profitability and productivity that can outweigh the costs of the policy. This paper reviews the empirical evidence on the link between environmental policy stringency and productivity growth, and the various channels through which such effects can take place. The results are ambiguous, in particular as many of the studies are fragile and context-specific, impeding the generalisation of conclusions. Practical problems related to data, measurement and estimation strategies are discussed, leading to suggestions as to how they can be addressed in future research. These include: improving the measurement of environmental policy stringency; investigating effects of different types of instruments and details of instrument design; exploiting cross-country variation; and the complementary use of different levels of aggregation.

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractMoving non-incremental innovations from the pilot scale to full commercial scale raises questions about the need and implementation of public support. Heuristics from the literature put policy makers in a dilemma between addressing a market failure and acknowledging a government failure: incentives for private investments in large scale demonstrations are weak (the valley of death) but the track record of governance in large demonstration projects is poor (the technology pork barrel). We reassess these arguments in the literature, particularly as to how they apply to supporting demonstration projects for decarbonizing industry. Conditions for the valley of death exist with: low appropriability, large chunky investments, unproven reliability, and uncertain future markets. We build a data set of 511 demonstration projects in nine technology areas and code characteristics for each project, including timing, motivations, and scale. We argue that the literature and the results from the case studies have five main implications for policy makers in making decisions about demonstration support. Policy makers should consider: 1) prioritizing learning, 2) iterative upscaling, 3) private sector engagement, 4) broad knowledge dissemination, and 5) making demand pull robust.

This paper proposes a measurement framework that explicitly accounts for the role of natural capital in productivity measurement. It is applied to aggregate economy data from the OECD Productivity Database, with natural capital data from the World Bank. It is shown that the direction of the adjustment to productivity growth depends on the rate of change of natural capital extraction relative to the rate of change of other inputs. The extended framework also makes the contribution of natural capital to economic growth explicit. This can be useful for countries relying on non-renewable resources to better understand the need to develop other sources of growth -human or productive capital -to prepare for times of scarcer resource endowments. The framework can readily be applied to more encompassing natural capital data, once it becomes available. JEL Codes: D24, Q56, Q50