Patents and Protocols: The Case of Acid Rain Abatement

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Patents and Protocols The Case of Acid Rain
Abatement

• Thijs Dekker
• VU Amsterdam (IvM)
• Herman Vollebergh
• Erasmus University Rotterdam TI
• Frans de Vries
• University of Groningen
• Cees Withagen
• Tilburg University VU Amsterdam TI

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Background
Helsinki
Oslo
Goth
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Motivation

• Remarkable reduction in SO2-emissions in most
  developed countries since 70s, but no clear
  effect from long range transboundary air
  pollution Protocols signed 1985 and 1994
• Parties would have reduced emissions to the same
  degree (or even further) without IEAs

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Motivation

• Widely accepted idea that international
  cooperation through agreements has little or no
  impact due to free riding
• IEAs reflect non-cooperative Nash behavior rather
  than cooperative behavior
• Hoel 92 Carraro Siniscalco 93
• Murdoch Sandler 97ab Murdoch et al 97, 03
• Finus Tjøtta 03, Barrett 03

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Goal main question

• To gain insight into the role of IEAs, in
  particular SO2 protocols, on technological
  innovation and diffusion
• Did the Helsinki and Oslo protocol enhance
  international technology diffusion?

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Technology Diffusion

• Popp (AER, 2002) confirms Hicks for invention
  induced by energy prices based on patent data
• Popp (JEEM, 2006) reduction in SO2-emission USA,
  Japan, Germany essentially response to local
  regulation
• Both Hicks and Popp focus on actual prices and
  observation interpreted at country level

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Technology Diffusion

• This paper focus on firms decision making
• Firms more likely decide to innovate anticipating
  regulation and therefore react to expected
  changes in relative prices (e.g. regulation)
• Market penetration of new ideas essentially
  through 2 channels of knowledge flows
• Unintended uncontrolled by inventing firm
• Intended controlled by inventing firm

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Background
Country A (Leader)
Regulation At
Regulated Firm A2
Mother Patent
Innovating Firm A1
border
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Background
yes/no
Sign Protocol tN
Country B (Follower)
Country A (Leader)
Regulation At
Regulation BtN
Regulated Firm A2
Firm B
Mother Patent
Innovating Firm A1
Family Patent
border
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Technology Diffusion

• Our hypotheses
• (Expected) Changes in environmental policy
  (relative prices) spur invention (Popp) and
  intended technology diffusion (through increase
  in patent families)
• Environmental treaties might lead to additional
  filings of patents by firms within the
  cooperating countries (intended knowledge flow)

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Patents

• Unique patent data set of SO2 abatement
  technologies
• Panel of patent applications across 15 countries
  between 1970-1997
• Focus on patent families instead of citations
  (Lanjouw Mody 96)
• Allows for measuring intended diffusion

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Patents

• Patent search European Patent Office
• Online database esp_at_cenet
• Direct office expertise
• Keyword search individual screening
• European Classification System (ECLA)
• Example B01D53/50 is class containing patents on
  the chemical or biological process to reduce SO2

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Patents

• Patent retrieval by keywords (priority date)
• Step 1 construct initial data base using general
  keywords (sulfur, SO2, etc)
• Step 2 keywords related to specific abatement
  techniques (e.g. scrubbers, desulphurization,
  fluidized bed combustion, oxidative
  desulphurization)
• Step 3 Screening of each single patent abstract
• yield 4,243 1,105 3,138
• net yield after exclusion countries (eg AU, CN,
  KR) 2,502
• Step 4 Separation in mother patents and
  family members (patents based on same priority)

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Patents

• Example Family application no. ? priority no.

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Distribution patent counts 1970-1997
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(No Transcript)
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Timing SO2-Protocols

• 1979 Protocol to the convention on long-range
  transboundary air pollution (not binding)
• 1985 Helsinki protocol uniform reduction target
  30 from 1980 levels by 1993
• 1994 Oslo protocol differential reduction
  targets from 1980 levels by 2000
• 1999 Gothenburg protocol differential reduction
  targets from 1990 levels by 2010

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SO2-Protocols
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SO2-Protocols

• Main local policy events

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Patents over Time
Helsinki
Oslo
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Patents over Time
Oslo
Helsinki
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Estimation

• Dependent variable patent count data
• Conditional mean fixed effects Poisson panel
• Pit mother/family patents in country i and year
  t
• ci country fixed effects for patent class j
• ?t year fixed effects for patent class j
• t (country specific) time trend
• Xit vector country specific control variables
  (coal share, GDP
• PROTSIG event variable
• d dummy for family patents

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Results
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Results
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Patent Flows 1982-1985 (Helsinki) 1992-1994
(Oslo)
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Conclusion

• Our paper demonstrates support for our main
  hypotheses
• Changes in (local) environmental policy (relative
  prices) spur invention innovative firms
  anticipate to more stringent policies (or
  facilitate them?)
• Environmental policy lead to additional filings
  of family patents by firms from abroad (intended
  knowledge flows)
• This effect is particularly strong for countries
  that cooperate through international agreements
  (and do not possess local inventing industries)