Fraunhofer Institute for
Systems and Innovation Research ISI

Corporate climate innovation strategies in response to international market-based climate policies - A system’s perspective on the roles of European technology providers and power utilities


Climate change is a major challenge to current and future societies and requires tremendous efforts to limit greenhouse gas emissions by both industrialized nations and developing countries. Recently, two international market-based mechanisms have been introduced to help countries reduce greenhouse gas emissions at low cost: the EU Emission Trading Scheme (EU ETS) for CO₂-emissions from energy-intensive companies and the Clean Development Mechanism (CDM) for emission reduction projects in developing countries. However, it is being debated whether the EU ETS and the CDM are designed in such a way as to encourage climate innovations. The proposed project explores how and to what extent the new market-based mechanisms in international climate policy affect corporate climate innovation strategies. More specifically, the following research questions will be addressed:

  • How and to what extent do different national EU ETS design choices affect corporate climate innovation strategies?

  • How and to what extent does the sectoral innovation system affect corporate climate innovation strategies?

  • How and to what extent do firm characteristics affect the choice of corporate climate innovation strategies in response to the EU ETS and CDM?

Exploring these questions is expected to provide valuable insights into the innovation effects of current climate change policies and how their design may be improved. The findings may also contribute to the emerging discussion of how these new mechanisms may be extended and applied to other industry sectors, gases, and countries.

Traditionally, the effects of environmental policies on innovation are analyzed within the theoretical framework of environmental economics. However, since the affected firms are highly heterogeneous and embedded in complex environments, addressing the questions above requires an interdisciplinary framework. By adding the perspectives of political science and management science the proposed project will enrich and extend the state-of-the art interdisciplinary innovation research in the field of regulation and environmental innovations.

The study focuses on technology providers and utilities in the power sector since the power sector is by far the largest contributor of CO₂ emissions and key for future innovation and emission reductions. The empirical research methodology comprises of qualitative and quantitative methods to deepen and test the theoretical framework: First, we conduct exploratory interviews with key actors in the German and European innovation system of the power sector. Second, we perform detailed case studies of Germany-based but internationally active technology providers and power utilities in order to refine our hypotheses regarding the most relevant determinants of corporate climate innovation strategies. Finally, we test our hypotheses by conducting a survey of European technology providers and power utilities.


June 2007 – November 2010


VW Stiftung


ETH Zürich, Group for Sustainability and Technology (Prof. Dr. Hoffmann)


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Rogge, K.S., Schneider M. and Hoffmann V.H. (2011): The innovation impact of the EU Emission Trading System - Findings of company case studies in the German Power Sector, Ecological Economics, 70 (3): 513-523.

Rogge, K.S. and Hoffmann, V.H. (2010): The impact of the EU ETS on the sectoral innovation system for power generation technologies - Findings for Germany, Energy Policy 38 (12): 7639-7652.

Rogge, K. (2010): The innovation impact of the EU Emission Trading System: An empirical analysis of the power sector. PhD Thesis, ETH Zurich.

Rogge, K.S. and Linden, C. (2010): Cross-Country Comparison of the Incentives of the EU Emission Trading Scheme for Replacing Existing Power Plants in 2008-12. Energy & Environment: 21 (7), 757-783.

Schleich, J., Rogge, K. and Betz, R. (2009): Incentives for energy efficiency in the EU Emissions Trading Scheme. In: Energy Efficiency, 2 (1): 37-67.

Schneider M., Hendrichs H. and Hoffmann V.H. (2010): Navigating the Global Carbon Market - An analysis of the CDM’s value chain and prevalent business models, Energy Policy 38 (10): 277-287.

Schneider M., Schmidt T. and Hoffmann V.H. (2010): Performance of Renewable Energy Technologies under the CDM, Climate Policy 10 (2010): 17–37.

Schneider M. (2009): Corporate Responses to the Emerging Global Carbon Market. PhD Thesis, ETH Zurich.

Schneider M., Holzer A. and Hoffmann V.H. (2008): Understanding the CDM’s contribution to technology transfer", Energy Policy 36 (8): 2930-2938.