Climate Innovation and Carbon Emissions: Evidence from Supply Chain Networks

Ulrich Hege, Kai Li and Yifei Zhang

No 25-1608, TSE Working Papers from Toulouse School of Economics (TSE)

Abstract: We study the effect of climate-related innovation on carbon emissions by analyzing supply chain networks. We find that climate innovation reduces carbon emissions at customer firms, driven by product innovations. The effect is economically significant, dominated by the most emission-intensive customer firms, gradually increases over a five-year horizon, and is significant for Scope 1 and Scope 2 emissions. We then look at the diffusion of climate innovation to new customers. We find that customers ex-hibit a strong preference for suppliers with new climate patents, that climate patents allow suppliers to attract new customers, especially customers with high environmental ratings or a large carbon footprint, and that these new customers subsequently also reduce their emissions. We use the quasi-random assignment of patent examiners and the exogenous technological obsolescence of climate patents as instruments to suggest a causal interpretation of the main findings.

Keywords: climate innovation; supply chains; new customer firms; business stealing; carbon emissions; environmental scores; patent examiner leniency; technology obsoles-cence. (search for similar items in EconPapers)
JEL-codes: L14 O31 O33 Q54 Q55 (search for similar items in EconPapers)
Date: 2025-01
New Economics Papers: this item is included in nep-ene, nep-env, nep-ino, nep-sbm and nep-tid
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Persistent link: https://EconPapers.repec.org/RePEc:tse:wpaper:130108

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