Patent Protection and the Transition to Clean Technology

We analyze the use of patent protection as a new policy to direct technical change to clean technology. Contrary to popular belief, it is dirty (and not clean) innovations that should be excluded from patent protection to reduce emissions. In the short run, removing patent protection on dirty technology increases emissions. However, the reduced markup on dirty technology can induce clean innovation, reducing emissions in the long run. We use a general equilibrium model to show both analytically and numerically that removing patent protection on dirty technology can indeed promote the energy transition and reduce the cost of mitigating climate change.