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Knowledge spillovers from clean innovation. A tradeoff between growth and climate?

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  • Martin, Ralf
  • Verhoeven, Dennis Johannes Mathijs

Abstract

Innovation policy faces a tradeoff between growth and climate objectives when the knowledge spillover externality from clean innovation is low compared to other sectors. To make such a comparison, we use patent data to estimate field-specific spillover returns generated by R&D support. Supporting Clean presents itself as a win-win opportunity, yielding global returns one-eighth higher than those of an untargeted policy. Nevertheless, only a modest portion of the returns stays within country borders, raising the question of whether national interests distort efficient allocation. Our policy simulations underscore the benefits of supranational coordination in clean innovation policy, potentially boosting returns by approximately 25% for the EU and over 60% globally. Moreover, the EU benefits strongly from US Clean innovation spillovers, impacting the debate on the Inflation Reduction Act. Overall, we identify no explicit innovation policy tradeoff in tackling the twin challenges of economic growth and climate change but emphasize the necessity for international cooperation.

Suggested Citation

  • Martin, Ralf & Verhoeven, Dennis Johannes Mathijs, 2023. "Knowledge spillovers from clean innovation. A tradeoff between growth and climate?," LSE Research Online Documents on Economics 121306, London School of Economics and Political Science, LSE Library.
  • Handle: RePEc:ehl:lserod:121306
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    Keywords

    innovation; knowledge spillovers; clean technology; innovation policy; green transition; net-zero; patent data;
    All these keywords.

    JEL classification:

    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital
    • 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
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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