From heat to high-tech: How innovation responds to climate change

Xianling Long and Zhiqiang Wang

Journal of Development Economics, 2025, vol. 176, issue C

Abstract: This paper examines how firms respond to climate change through technological innovation. We emphasize that firms facing climate change are not always those innovating. Instead, innovation occurs either to mitigate a firm’s own climate-related damages (internal demand) or to supply climate-related technologies to other firms (external demand). To reflect this, we measure patent-specific exposure to climate change rather than traditional firm-level exposure to local temperatures. Our findings show that in China, climate adaptation patents increased by 8.62%, and climate mitigation patents grew by 10.68% in response to climate change. We document that new technologies respond positively to climate change due to rising public awareness, shifting demand, and regulatory pressures.

Keywords: Heat exposure; Climate change adaptation; Climate change mitigation; Directed innovation (search for similar items in EconPapers)
JEL-codes: D22 O31 O33 Q54 Q55 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:deveco:v:176:y:2025:i:c:s0304387825000768

DOI: 10.1016/j.jdeveco.2025.103525

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