IMF Working Papers

The Drivers and Macroeconomic Impacts of Low-Carbon Innovation: A Cross-Country Exploration

By Zeina Hasna, Henry Hatton, Florence Jaumotte, Jaden Kim, Kamiar Mohaddes, Samuel Pienknagura

June 27, 2025

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Format: Chicago

Zeina Hasna, Henry Hatton, Florence Jaumotte, Jaden Kim, Kamiar Mohaddes, and Samuel Pienknagura. "The Drivers and Macroeconomic Impacts of Low-Carbon Innovation: A Cross-Country Exploration", IMF Working Papers 2025, 130 (2025), accessed November 7, 2025, https://doi.org/10.5089/9798229015486.001

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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 how climate policies affect low-carbon innovation (as measured by patents) and assesses the link between such innovation and economic activity. Climate policies, including international cooperation, spur both specific and overall innovation, with regulations, emissions-trading systems, and expenditure measures such as R&D subsidies and feed-in tariffs being particularly impactful. In turn, low-carbon innovation raises economic activity as much as other types of innovation and past technological revolutions. However, the mechanisms are different: low-carbon innovation increases capital accumulation, while other types of innovation increase total factor productivity (TFP).

Subject: Climate change, Climate policy, Emerging technologies, Environment, Technological innovation, Technology

Keywords: Climate change, Climate policies, Climate policy, Emerging technologies, Expense policy, Global, Growth, Low-Carbon Innovation, Patent filing, Policy count shock, Policy instrument, Porter Hypothesis, Revenue policy, Technological innovation

Publication Details

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