This paper argues that cross-technology knowledge spillovers are critical for understanding policy's role in the transition to clean technology. I develop an endogenous growth model with clean and dirty technologies and a network of cross-technology spillovers. The resulting formulas for the size and speed of technological transition, following a policy reform, show that greater spillovers induce faster transitions but reduce the long-run impact of policy. Such spillovers also prevent lock-in of dirty technology. Using patent citation data, I apply my model to US transportation and electricity generation and find that spillovers are mid-sized: they prevent lock-in but imply slow transitions with high long-run impact of policy. I then examine how cross-technology spillovers affect optimal policy, deriving innovation subsidy formulas under arbitrary carbon prices. Quantitatively, a "big push" of clean innovation subsidies is no longer optimal because the spillover network allows us to build toward clean technology in the future by innovating in other technologies today.

Awards:

Graduate Student Paper Award (Finalist), Bank of Canada, 2023


Download Paper