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The Drivers and Macroeconomic Impacts of Low-Carbon Innovation: A Cross-Country Exploration

Author

Listed:
  • Ms. Zeina Hasna
  • Henry Hatton
  • Ms. Florence Jaumotte
  • Jaden Kim
  • Mr. Kamiar Mohaddes
  • Samuel Pienknagura

Abstract

This paper investigates how climate policies affect low-carbon innovation (as measured by patents) and assesses the link between such innovation and economic activity. Climate policies, including international cooperation, spur both specific and overall innovation, with regulations, emissions-trading systems, and expenditure measures such as R&D subsidies and feed-in tariffs being particularly impactful. In turn, low-carbon innovation raises economic activity as much as other types of innovation and past technological revolutions. However, the mechanisms are different: low-carbon innovation increases capital accumulation, while other types of innovation increase total factor productivity (TFP).

Suggested Citation

  • Ms. Zeina Hasna & Henry Hatton & Ms. Florence Jaumotte & Jaden Kim & Mr. Kamiar Mohaddes & Samuel Pienknagura, 2025. "The Drivers and Macroeconomic Impacts of Low-Carbon Innovation: A Cross-Country Exploration," IMF Working Papers 2025/130, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2025/130
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    Keywords

    Low-Carbon Innovation; Growth; Climate policies; Climate change; Porter Hypothesis;
    All these keywords.

    JEL classification:

    • F64 - International Economics - - Economic Impacts of Globalization - - - Environment
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O44 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Environment and Growth
    • Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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