The influence of energy prices on adoption of clean technologies and recycling: Evidence from European SMEs

Abstract

This paper examines the relative influence of energy prices on several environmental practices at firm level among SMEs. To that aim, we explore an EU-wide data-set providing information for 5194 SMEs in 27 European countries. We distinguish between recycling and purchasing and/or development of cleaner technologies and investigate whether the set of external and internal factors to the firm driving the adoption of least-integrated environmental innovation (recycling) differ from those influencing cleaner technologies (either purchased or in-house). The main findings stemming from a multivariate probit model suggest some significant differences among firms performing recycling practices and those purchasing and developing cleaner technologies. In particular, we find that current energy prices only increase the probability to adopt recycling practices while they have no significant effect on the most-integrated environmental innovation (developing cleaner technologies). Our results also indicate that market factors (proxied as expected increases in the demand for green products) are more relevant drivers of the least-advanced eco-innovation than of developing cleaner technologies. Interestingly, we find that higher technological and managerial capabilities are more effective in driving the adoption of cleaner technologies than in enhancing recycling solutions. A positive impact of cooperation and collaboration with universities and private agencies is found only on developing cleaner technologies in-house. This finding confirms the role of knowledge networks for the most-advanced innovative practice. Finally, neither existing nor future environmental regulations have significant impact on environmentally-friendly innovative practices while subsidies only increase the probability of purchasing cleaner technologies.