Promoting Green Innovation Through Climate Change Policies

What is it about?

Climate change is one of the most important challenges of our time. Shifting to renewable energy sources is needed to ensure our planet's sustainability. In this regard, governments are trying to develop and implement climate change policies (CCPs) that limit pollution. But can precise CCPs make it easier for companies to develop green technology? The authors of this working paper examined how enacting CCPs in 40 countries affected green innovation there. They found that as the CCPs became more rigid, the number of new patents related to green technology increased. The authors further noted that not all CCPs promoted green innovation. Those that were aimed at making research and development cheaper had more positive effects than did those that were aimed at markets. Besides, they found that CCPs have more impact in countries with stronger economies.

Featured Image

Photo by Towfiqu barbhuiya on Unsplash

Photo by Towfiqu barbhuiya on Unsplash

Why is it important?

The impact of climate change can be severe for the people and the planet. At this point, new green innovation can be a game changer. Green innovation comes at a cost. Companies must spend huge amounts of money and time developing green technology. Besides, new technology may take years to generate profit. As such, policymakers must provide the necessary push for green innovation through new laws. KEY TAKEAWAY: Under the right conditions, CCPs can promote green innovation. When CCPs become firmer, companies are likely to respond with increased development of green technologies with lower uncertainties. Policymakers should design strategies to maximize the positive impacts of CCPs on green innovation. This research relates to the following Sustainable Development Goals: • SDG 13: Climate Action • SDG 9: Industry, Innovation, and Infrastructure • SDG 7: Affordable and Clean Energy • SDG 8: Decent Work and Economic Growth • SDG 12: Responsible Consumption and Production Disclaimer - This summary was prepared by Kudos Innovations Ltd and does not necessarily represent the views of International Monetary Fund (IMF).