The effect of climate policy on innovation and economic performance along the supply
chain
A firm- and sector-level analysis
The paper empirically assesses the effect of climate policy stringency on innovation
and economic performance, both directly on regulated sectors and indirectly through
supply chain relationships. The analysis is based on a combination of firm- and sector-level
data, covering 19 countries and the period from 1990 to 2015. The paper shows that
climate policies are effective at inducing innovation in low-carbon technologies in
directly regulated sectors. It does not find evidence that climate policies induce
significant innovation along the supply chain. In addition, there is no evidence that
climate policies – through the channel of clean innovation – either harm or improve
the economic performance of regulated firms. This supports the evidence that past
climate policies have not been major burdens on firms’ competitiveness, and that clean
innovation may enable firms to compensate for the potential costs implied by new environmental
regulations.
Published on February 15, 2022
In series:OECD Environment Working Papersview more titles