Global | Green Innovation to boost activity and cut emissions

Countries that expand their climate policy portfolio exhibit higher climate change mitigation patent filings, low carbon technology trade flows, and green foreign direct investment flows. The coordination and cooperation of international policies is also relevant, showcasing evidence of potential climate policy spillovers.

Key points

• Key points:
• Innovation in low carbon technologies (LCTs), which is essential in the fight against climate change, has slowed in recent years. The surge in hydraulic fracking, lowering oil prices and diverting focus from renewable energies, alongside the technological maturity in sectors like solar PV, have contributed to this slowdown.
• Green innovation can boost medium-term economic growth. This pro-growth effect is comparable to that of non green patents and of technological breakthroughs, but the channels through which they affect growth are different -green patents work initially mostly through higher investment, whereas non green patents also have a positive short-term impact on productivity.
• Domestic and international climate policies significantly bolster green innovation. The impact of global climate policies and international agreements, like the Kyoto Protocol and Paris Agreement, is even more pronounced than domestic measures, underscoring the importance of policy certainty, global market scale, and technological spillovers in driving innovation.

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