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The Impact of "Green Regulation" on Firms’ Innovation

Author

Listed:
  • Juan S. Mora-Sanguinetti
  • Cristina Peñasco
  • Rok Spruk

Abstract

This paper analyses the effect of “green regulations” i.e. those aimed at mitigating the effects of climate change and environmental externalities, on innovation, using a novel regulatory database covering the period 2008 – 2022 for Spain. The database identifies regulations at both the national and regional levels through textual analysis. Employing a panel data approach, we assess how different types of environmental regulations—particularly those related to renewable energy—affect firm-level innovation activities. Our findings indicate that national level green regulations have a positive effect on innovation, whereas regional level regulations show mixed or negligible impacts. Importantly, the interaction between national and regional regulations, measuring the simultaneous production of legal texts at both levels can foster innovation but at a reduced pace with respect to the sole production of regulation at the national level. Given the results for regional-level regulation, our results provide evidence in favour of the hypothesis that regulatory fragmentation due to unequal, overlapping, inconsistent or conflicting procedure across jurisdictions may diminish these benefits.

Suggested Citation

  • Juan S. Mora-Sanguinetti & Cristina Peñasco & Rok Spruk, 2025. "The Impact of "Green Regulation" on Firms’ Innovation," Working papers 1016, Banque de France.
    • Handle: RePEc:bfr:banfra:1016
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    JEL classification:

    • K32 - Law and Economics - - Other Substantive Areas of Law - - - Energy, Environmental, Health, and Safety Law
    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics
    • O44 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Environment and Growth
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products

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