these two features that would in theory induce innovation or technology diffusion more so in Ireland than in other member states, we feel it is reasonable to conclude that Irish firms faced similar incentives to engage in various aspects of technological change.

## Research methodology

In order to gain an accurate understanding of the technological response by Irish firms to the price signal resulting from the EU ETS we survey all firms that have installations in the EU ETS. 72 firms were included in the trading sector in Ireland when the pilot phase commenced, but 4 closures led to a total of 68 potential respondents. Surveys were mailed to contacts for each installation as provided by the Community Independent Transaction Log (CITL) and the Irish EPA database. A total of 30 firms returned and completed the questionnaire which represents a response rate of just over 44%. After analysing the results of the mail survey we then arranged semi-structured interviews with 7 firms that represented the different groups of the Irish trading community in terms of firm and emissions magnitudes, industry, and structure as either indigenous Irish firms, or a part of a larger multi-national group, of which there are many in Ireland.

In order to protect the confidentiality of the survey respondents and interviewees, we are not able to relate the actions taken towards innovation and technological change as a percentage of total allocated permits, or another metric that would signify what portion of the Irish $ CO_{2} $ trading community is engaged in innovative responses to the $ CO_{2} $ constraint. One firm, the Electricity Supply Board (ESB), is an operator of multiple power generation installations and accounts for nearly half of Irish allocations. As a hypothetical example, making the statement that 5 firms representing 78% of the Irish trading market did not engage in $ CO_{2} $ emissions reduction related research and development does not adequately protect the confidentiality of the ESB due to their share of the Irish traded sector. Therefore, we present our results as percentages of responding firms that took the indicated actions. There is no intent to signify if the respondents are large or small players, or members of certain industries.

## Results

In order to encourage favourable response rates and clear answers, we considered the possible responses to emissions trading in terms of technological change. We divided question sets into possible reactions areas in order to get a better insight into the reaction to the price on $ CO_{2} $ emissions. The question areas dealt with change in machinery and other forms of physical capital, process or behavioural change, and fuel switching. We also asked firms about their management and compliance strategies and attitudes towards $ CO_{2} $ related research and development and the impact (both recent and future expected) of the EU ETS on business and investment strategies.

An important thing to keep in mind is that the EU ETS took place against the backdrop of an energy price upswing and respondents were very clear in stating that much of their energy savings related actions were spurred by energy prices and not the EU ETS. Figure 1 below displays the spot prices per barrel of European Brent crude oil. The time series runs from