Financial Markets and Green Innovation

66 Pages Posted: 27 Jul 2022

See all articles by Philippe Aghion

Philippe Aghion

Université Paris VI Pierre et Marie Curie - College de France; Centre for Economic Policy Research (CEPR)

Lena Boneva

European Central Bank (ECB); Centre for Economic Policy Research (CEPR)

Johannes Breckenfelder

European Central Bank (ECB) - Financial Research

Luc Laeven

European Central Bank (ECB); Centre for Economic Policy Research (CEPR)

Conny Olovsson

Sveriges Riksbank

Alexander A. Popov

European Central Bank (ECB)

Elena Rancoita

European Central Bank (ECB)

Date Written: July 1, 2022

Abstract

Fulfilling the commitments embedded in the Paris Agreement requires a climate-technologyrevolution. Patented innovation of low-carbon technologies is lower in the EU than in selectedpeers, and very heterogeneous across member states. We motivate this fact with anendogenous model of directed technical change with government policy and financialmarkets. Variations in carbon taxes, R&D investment, and venture capital investment explaina large share of the variation in green patents per capita in the data. We discuss implicationsfor policy, concluding that governments can play a catalytic role in stimulating greeninnovation while the role of central banks is limited.

Keywords: central banks, climate change, directed technical change, financial markets, public policy

JEL Classification: E5, G1, O4, Q5

Suggested Citation

Aghion, Philippe and Boneva, Lena and Breckenfelder, Johannes and Laeven, Luc A. and Olovsson, Conny and Popov, Alexander A. and Rancoita, Elena, Financial Markets and Green Innovation (July 1, 2022). ECB Working Paper No. 2022/2686, Available at SSRN: https://ssrn.com/abstract=4173682 or http://dx.doi.org/10.2139/ssrn.4173682

Philippe Aghion (Contact Author)

Université Paris VI Pierre et Marie Curie - College de France ( email )

11 Place Marcellin Berthelot
Paris, 75005
France

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Lena Boneva

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Johannes Breckenfelder

European Central Bank (ECB) - Financial Research ( email )

Sonnemannstrasse 20
D-60314 Frankfurt am Main
Germany

HOME PAGE: http://johannesbreckenfelder.eu/

Luc A. Laeven

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Conny Olovsson

Sveriges Riksbank ( email )

Brunkebergstorg 11
SE-103 37 Stockholm
Sweden

Alexander A. Popov

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Elena Rancoita

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

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