Distributional effects of energy innovation

This chapter conceptualizes the distributional impacts of energy innovation adoption. Following the existing literature on energy innovation, the chapter provides a conceptual framework to map costs and benefits from energy innovation adoption at various levels, including households, firms, and governments. The authors first conceptualize the relevant decision-making dimensions at the micro and the macro levels for determining the distributional effects of energy innovation adoption. They then illustrate how the conceptualization can be applied to Indian household consumption data. The results are twofold. First, the conceptual findings resonate well with empirical findings showing that early adopters of energy innovation tend to be richer households. Second, as long as energy innovation policy-induced costs are proportional to income, they do not create additional vertical distributional impacts. Finally, the chapter discusses how the costs and benefits of energy innovation on avoided climate impacts and stranded assets would be distributed.