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Damien Dussaux.pdf

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The Economic Consequences of
Green Innovation
Damien Dussaux
OECD Environment Directorate
Environment and Economy Integrat...

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Lessons Learned and Key Policy Issues
Environmental
Performance
Economic
Performance
Green
innovation
?
Environmental
Poli...

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Outline
3
Lessons learned and key policy issues
The Effect of Policy-induced Low carbon
Innovation on Firm Economic Perfor...

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Damien Dussaux.pdf

  1. 1. The Economic Consequences of Green Innovation Damien Dussaux OECD Environment Directorate Environment and Economy Integration Division ITEM 2. ENVIRONMENTAL POLICY, CLEAN INNOVATION AND PRODUCTIVITY
  2. 2. Lessons Learned and Key Policy Issues Environmental Performance Economic Performance Green innovation ? Environmental Policy Stringency
  3. 3. Outline 3 Lessons learned and key policy issues The Effect of Policy-induced Low carbon Innovation on Firm Economic Performance The Economic Benefits of Early Green Innovation
  4. 4. Source: Dechezleprêtre, A. and T. Kruse (2022), "The effect of climate policy on innovation and economic performance along the supply chain: A firm- and sector-level analysis", OECD Environment Working Papers, No. 189, OECD Publishing, Paris, https://doi.org/10.1787/3569283a-en. 4 The Effect of Policy-induced Low carbon Innovation on Firm Economic Performance Green innovation (sector) Environmental Policy Stringency (sector) Environmental Policy Stringency (upstream) Environmental Policy Stringency (downstream) Supply chain insignificant Economic Performance ? insignificant
  5. 5. 5 • Firm (i) × Country (c) × Sector (s) × Year (t) – 7 145 manufacturing firms in 19 countries, 1990-2015 • 𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖 : Log of multifactor productivity (MFP), or log of value added (VA)) [Orbis] • MPSicst : Log of the low-carbon patent stock [Patstat – Y02 tagging system] – Instrumented to get causal effect based on firm’s pre-sample green innovation behaviour and sector x country level growth in green innovation out of the firm’s control • Controls: employees, avg. wage, capital intensity, firm, sector × year and country × year fixed effects The Effect of Policy-induced Low carbon Innovation on Firm Economic Performance 𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖 = 𝜎𝜎 + 𝜷𝜷 � 𝑴𝑴𝑴𝑴𝑴𝑴𝒊𝒊𝒊𝒊𝒊𝒊𝒊𝒊−𝟏𝟏 + 𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝑖𝑖𝑖𝑖𝑖𝑖,𝑡𝑡−1 + 𝜇𝜇𝑖𝑖 + 𝜏𝜏𝑡𝑡 + 𝜀𝜀𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖
  6. 6. • No evidence that policy induced low-carbon innovation harms or improves the economic performance of firms. 6 The Effect of Policy-induced Low carbon Innovation on Firm Economic Performance
  7. 7. Outline 7 Lessons learned and key policy issues The Effect of Policy-induced Low carbon Innovation on Firm Economic Performance The Economic Benefits of Early Green Innovation
  8. 8. • An econometric analysis of the car manufacturing sector – Passenger cars account for 10% of CO2 emissions worldwide (IEA, 2020) – Significant clean innovation occurred: fuel saving and hybrid, electric cars • Estimating impact of fuel prices on car manufacturers’ economic performance as a function of – Different kinds of innovation: dirty, clean (hybrid and EV), grey (fuel saving) – Testing for different timings 8 The Economic Benefits of Early Green Innovation (contribution) Does past green innovation pay off when price signals get stronger? • Preliminary work from Alberto Agnelli, Hélia Costa and Damien Dussaux
  9. 9. • Panel data 2005 -2020: Manufacturer (i) × Country (c) × Year (t) • Economic performance: market share (% of # cars sold) – From national automobiles associations – 19 manufacturers accounting for 95% of market shares in – 8 countries: France, Germany, Italy, Japan, Poland, Portugal, Spain, United States • Green innovation: share of the firms’ patent stocks (Patstat) – Dirty car technologies – Fuel saving (grey) car technologies – Cleaner car technologies: hybrid and EV cars • Fuel prices including fuel tax directly linked to environmental policies (OECD) 9 The Economic Benefits of Early Green Innovation (data) Aghion et al. (2016)
  10. 10. 10 The Economic Benefits of Early Green Innovation (model and results) 𝑚𝑚𝑚𝑚𝑚𝑚 𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑖𝑖𝑖𝑖𝑖𝑖 = 𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑐𝑐𝑐𝑐 × 𝑔𝑔𝑔𝑔𝑔𝑔𝑔𝑔𝒊𝒊𝒊𝒊−𝒌𝒌 + 𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑐𝑐𝑐𝑐 × 𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝒊𝒊𝒊𝒊−𝒌𝒌 + 𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑐𝑐𝑐𝑐 × 𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝒊𝒊𝒊𝒊−𝒌𝒌 +𝜌𝜌𝑖𝑖𝑖𝑖 + 𝜎𝜎𝑐𝑐𝑐𝑐 + 𝜑𝜑𝑐𝑐𝑐𝑐 + 𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑖𝑖𝑖𝑖𝑖𝑖 + 𝜀𝜀𝑖𝑖𝑖𝑖𝑖𝑖 • 𝝆𝝆𝒊𝒊𝒊𝒊, 𝝈𝝈𝒄𝒄𝒄𝒄, 𝝋𝝋𝒄𝒄𝒄𝒄 : firm-year, country-firm, and country-year fixed effects • Controls: fuel price × with stock in all patents, time trends × firm size in year 0
  11. 11. Thank you For more information: Damien.Dussaux@oecd.org

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