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Knowledge spillovers from clean innovation. A tradeoff between growth and climate?

Ralf Martin and Dennis Verhoeven

CEP Discussion Papers from Centre for Economic Performance, LSE

Abstract: Innovation policy faces a tradeoff between growth and climate objectives when the knowledge spillover externality from clean innovation is low compared to other sectors. To make such a comparison, we use patent data to estimate field-specific spillover returns generated by R&D support. Supporting Clean presents itself as a win-win opportunity, yielding global returns one-eighth higher than those of an untargeted policy. Nevertheless, only a modest portion of the returns stays within country borders, raising the question of whether national interests distort efficient allocation. Our policy simulations underscore the benefits of supranational coordination in clean innovation policy, potentially boosting returns by approximately 25% for the EU and over 60% globally. Moreover, the EU benefits strongly from US Clean innovation spillovers, impacting the debate on the Inflation Reduction Act. Overall, we identify no explicit innovation policy tradeoff in tackling the twin challenges of economic growth and climate change but emphasize the necessity for international cooperation.

Keywords: innovation; knowledge spillovers; clean technology; innovation policy; green transition; net-zero; patent data; Economic geography; Green Growth; Productivity; Technological change (search for similar items in EconPapers)
Date: 2023-07-12
New Economics Papers: this item is included in nep-cse, nep-ene, nep-env, nep-geo, nep-ino, nep-knm, nep-sbm and nep-tid
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