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Financial Markets and Green Innovation

Author

Listed:
  • Aghion, Philippe
  • Boneva, Lena
  • Breckenfelder, Johannes
  • Laeven, Luc
  • Olovsson, Conny
  • Popov, Alexander
  • Rancoita, Elena

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. JEL Classification: E5, G1, O4, Q5

Suggested Citation

  • Aghion, Philippe & Boneva, Lena & Breckenfelder, Johannes & Laeven, Luc & Olovsson, Conny & Popov, Alexander & Rancoita, Elena, 2022. "Financial Markets and Green Innovation," Working Paper Series 2686, European Central Bank.
    • Handle: RePEc:ecb:ecbwps:20222686
    Note: 1125999
    as

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    References listed on IDEAS

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    More about this item

    Keywords

    central banks; climate change; directed technical change; financial markets; public policy;
    All these keywords.

    JEL classification:

    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • G1 - Financial Economics - - General Financial Markets
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics

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