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When innovation meets regulation: Reducing carbon intensity in Europe

Author

Listed:
  • Diriba, Samuel R.
  • Esposito, Luca
  • Tedeschi, Marco

Abstract

This study investigates how technological innovation affects carbon intensity in 17 European countries from 2002 to 2020. Using a dynamic panel approach, we distinguish between patents by applicants and inventors and explore their interaction with environmental policy stringency. Our findings reveal that innovation alone does not reduce carbon intensity; instead, a significant reduction occurs when innovation is supported by stringent environmental policies. Notably, the applicants’ patents drive this effect, suggesting the critical role of policy in steering innovation toward sustainability. These results offer important insights into aligning innovation systems with climate goals in advanced economies.

Suggested Citation

  • Diriba, Samuel R. & Esposito, Luca & Tedeschi, Marco, 2026. "When innovation meets regulation: Reducing carbon intensity in Europe," Finance Research Letters, Elsevier, vol. 96(C).
    • Handle: RePEc:eee:finlet:v:96:y:2026:i:c:s1544612326003119
    DOI: 10.1016/j.frl.2026.109781
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    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy
    • Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation

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