Green Innovation and Diffusion: Policies to Accelerate Them and Expected Impact on Macroeconomic and Firm-Level Performance

By Zeina Hasna, Florence Jaumotte, Jaden Kim, Samuel Pienknagura, Gregor Schwerhoff

November 6, 2023

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Zeina Hasna, Florence Jaumotte, Jaden Kim, Samuel Pienknagura, and Gregor Schwerhoff. Green Innovation and Diffusion: Policies to Accelerate Them and Expected Impact on Macroeconomic and Firm-Level Performance, (USA: International Monetary Fund, 2023) accessed December 21, 2024

Disclaimer: This Staff Discussion Note represents the views of the authors and does not necessarily represent IMF views or IMF policy. The views expressed herein should be attributed to the authors and not to the IMF, its Executive Board, or its management. Staff Discussion Notes are published to elicit comments and to further debate.

Summary

Innovation in low-carbon technologies (LCTs), which is essential in the fight against climate change, has slowed in recent years. This Staff Discussion Note shows that a global climate policy strategy can bolster innovation in, and deployment of, LCTs. Countries that expand their climate policy portfolio exhibit higher (1) climate-change-mitigation-patent filings, (2) LCT trade flows, and (3) “green” foreign direct investment flows. Importantly, boosting innovation in, and deployment of, LCTs yields medium-term growth, which mitigates potential costs from climate policies. This note stresses the importance of international policy coordination and cooperation by showcasing evidence of potential climate policy spillovers.

Subject: Balance of payments, Economic sectors, Environment, Financial crises, Financial markets, Technology

Keywords: Climate change, Climate policy, Economic performance, Emerging and frontier financial markets, Environmental policies, Foreign direct investment, Global, Green FDI inflow, Green innovation, LCT trade, Low-carbon technologies, Policy coordination, Policy implication, Portfolio exhibit, Technological diffusion and deployment

Publication Details

Pages:

31
Volume:

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DOI:

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Issue:

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Series:

Staff Discussion Notes No. 2023/008
Stock No:

SDNEA2023008
ISBN:

9798400256950
ISSN:

2617-6750

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