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The effect of climate policy on innovation and economic performance along the supply chain: A firm- and sector-level analysis

Author

Listed:
  • Antoine Dechezleprêtre

    (OECD)

  • Tobias Kruse

    (OECD)

Abstract

The paper empirically assesses the effect of climate policy stringency on innovation and economic performance, both directly on regulated sectors and indirectly through supply chain relationships. The analysis is based on a combination of firm- and sector-level data, covering 19 countries and the period from 1990 to 2015. The paper shows that climate policies are effective at inducing innovation in low-carbon technologies in directly regulated sectors. It does not find evidence that climate policies induce significant innovation along the supply chain. In addition, there is no evidence that climate policies – through the channel of clean innovation – either harm or improve the economic performance of regulated firms. This supports the evidence that past climate policies have not been major burdens on firms’ competitiveness, and that clean innovation may enable firms to compensate for the potential costs implied by new environmental regulations.

Suggested Citation

  • Antoine Dechezleprêtre & Tobias Kruse, 2022. "The effect of climate policy on innovation and economic performance along the supply chain: A firm- and sector-level analysis," OECD Environment Working Papers 189, OECD Publishing.
  • Handle: RePEc:oec:envaaa:189-en
    DOI: 10.1787/3569283a-en
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    More about this item

    Keywords

    Firm performance; Low carbon innovation; Policy evaluation; Porter Hypothesis;
    All these keywords.

    JEL classification:

    • 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
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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