IMF Working Papers

Environmental Policies and Innovation in Renewable Energy

ByLuca Bettarelli, Davide Furceri, Pietro Pizzuto, Nadia Shakoor

September 1, 2023

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Format: Chicago

Luca Bettarelli, Davide Furceri, Pietro Pizzuto, and Nadia Shakoor. "Environmental Policies and Innovation in Renewable Energy", IMF Working Papers 2023, 180 (2023), accessed 12/5/2025, https://doi.org/10.5089/9798400251658.001

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Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

This paper investigates the effect of Climate Change Policies (CCPs) on green innovation, for a sample of 40 advanced and emerging market economies and 5 economic sectors, during the period 2000-2021. Our results suggest that CCPs increase green patents, with the effect increasing gradually over time. The effect is larger for non-market-based policies—such as R&D subsidies—and technology-support instruments, in countries with greater competitiveness and during periods of stronger economic activity—that is, higher GDP growth, lower uncertainty and financial stress. The results based on a difference-in-differences approach suggest that the positive effect of stricter CCPs on green innovation is stronger in sectors with limited financial constraints.

Subject: Climate change, Climate policy, Competition, Environment, Environmental policy, Financial markets, Renewable energy

Keywords: CCPS increase, Climate change, climate change policy, Climate policy, Competition, diff-in-diff approach, effect of Climate Change Policies, Environmental policy, Global, green patents, innovation, innovation in renewable energy, Renewable energy, technology-support instrument, technology-support policy

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