## Environmental Policies and Innovation in Renewable Energy

_IMF Working Papers, September 1, 2023_

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## Bibliographic details
- Authors: Luca Bettarelli, Davide Furceri, Pietro Pizzuto, Nadia Shakoor
- Published: September 1, 2023
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9798400251658.001

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### Overview
- Title: Environmental Policies and Innovation in Renewable Energy
- Authors: Luca Bettarelli, Davide Furceri, Pietro Pizzuto, Nadia Shakoor
- Publication type: IMF Working Papers
- Publication date: September 1, 2023
- Sample and scope: sample of 40 advanced and emerging market economies and 5 economic sectors, during the period 2000-2021
- Pages: 55
- Volume: 2023
- Issue: 180
- Series: Working Paper No. 2023/180
- DOI: https://doi.org/10.5089/9798400251658.001
- Stock No: WPIEA2023180
- ISBN: 9798400251658
- ISSN: 1018-5941

### Key findings
- CCPs increase green patents, with the effect increasing gradually over time.
- The effect of CCPs on green innovation is larger for non-market-based policies—such as R&D subsidies—and technology-support instruments.
- The positive effect of CCPs is larger in countries with greater competitiveness.
- The positive effect of CCPs is larger during periods of stronger economic activity—that is, higher GDP growth, lower uncertainty and financial stress.
- 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.

### Methodology notes
- Empirical scope: 40 advanced and emerging market economies; 5 economic sectors; period 2000-2021.
- Identification: difference-in-differences approach used to assess the effect of stricter CCPs on green innovation across sectors with differing financial constraints.

### Policy implications (as inferred from findings)
- Non-market-based climate change policies—such as R&D subsidies—and technology-support instruments can be effective tools to increase green patents.
- Strengthening policies when macroeconomic conditions are favorable (higher GDP growth, lower uncertainty and financial stress) may amplify innovation outcomes.
- Policies aiming to foster green innovation may need to account for sectoral financial constraints; sectors with limited financial constraints experience stronger innovation responses to stricter CCPs.
- Enhancing country-level competitiveness may increase the effectiveness of CCPs in promoting green innovation.

*IMF Working Paper: "Environmental Policies and Innovation in Renewable Energy", Luca Bettarelli, Davide Furceri, Pietro Pizzuto, Nadia Shakoor, September 1, 2023; Working Paper No. 2023/180; DOI: https://doi.org/10.5089/9798400251658.001*

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_Source: https://www.imf.org/en/publications/wp/issues/2023/09/01/environmental-policies-and-innovation-in-renewable-energy-538759_