The Impact of "Green Regulation" on Firms’ Innovation

Juan S. Mora-Sanguinetti, Cristina Peñasco and Rok Spruk

Working papers from Banque de France

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.

Keywords: Green Regulation; Innovation; Porter Hypothesis; Renewable Energy; Business (search for similar items in EconPapers)
JEL-codes: K32 O13 O44 Q5 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2025
New Economics Papers: this item is included in nep-cse, nep-eur, nep-reg, nep-sbm and nep-tid
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Persistent link: https://EconPapers.repec.org/RePEc:bfr:banfra:1016

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