The CO2 Question: Technical Progress and the Climate Crisis

Abstract

We split green innovation into pure green and fuel efficiency patent filings and study its effects on carbon emissions in a large sample of global firms. Despite a steady rise in green R&D, we find that green innovation does not predict future reductions in emissions of innovating firms. Fuel efficiency innovation improves emission intensity but is also associated with higher future sales and investments, resulting in higher future emissions. At the industry level, countervailing effects in terms of emission intensity improvements and changing market shares of innovators on net result in green (fuel efficiency) innovation predicting higher (lower) future emissions.

Keywords: carbon emissions, green patents, brown efficiency patents, path dependence of innovation, Jevons paradox, displacement effect, Arrow replacement effect

JEL Classification: G12, G23, G30, D62, D83