Knowledge spillovers from clean and dirty technologies

Government policy in support of innovation often varies across technology areas. An important example are climate change policies that typically try to support so-called clean technologies that avoid greenhouse gas pollution and hamper dirty technologies that are associated with polluting emissions. This paper explores the economic consequences of such policy moves in the short run.

At the margin private returns of R&D investments in different areas should be equalised. Hence, shifting the composition of R&D activities by a policy intervention will only have a meaningful impact on economic outcomes if the external returns differ. The authors compare innovation spillovers between clean, dirty and other emerging technologies using patent citation data. They develop a new methodology including the usage of page rank measures developed by Google to rank web content. Exploring a wide range of robustness checks, the authors consistently find up to 40% higher levels of spillovers from clean technologies. They also use firm-level financial data to investigate the impact of knowledge spillovers on firms’ market value and find that the marginal economic value of spillovers from clean technologies is also greater.

This paper updates an earlier version published in October 2013.

ISSN 2515-5717 (Online) – Grantham Research Institute Working Paper series

ISSN 2515-5709 (Online) – CCCEP Working Paper series