Financial Markets and Green Innovation

Making the grass greener

“…To investigate whether firms performing green investment tend to attract more labour and grow faster compared to their counterparts and whether financing conditions are altering the relationship between green investment and growth, we adapt the standard models of dynamic allocative efficiency -see for instance Adalet McGowan et al (2017 [70]) for an empirical application -and estimate the following equation:…”

Clean Innovation and Heterogeneous Financing Costs

“…Without loss of generality, we normalise ψ ≡ α 2 (as in Acemoglu et al, 2012, Aghion et al, 2022. Each machine producer faces the demand x jit in (3b): since the demand is iso-elastic, the monopoly price is a constant mark-up over the marginal cost, i.e.…”

“…Conversely, if the experience effect is linked to research, the policy ambition translates into a higher initial clean research subsidy (higher by 26%, or 0.1% of GDP). Therefore, the choice of optimal climate policies will differ across markets, technologies, and geographical areas if the nature of this experience effect differs, possibly due to different lending environments and institutions (see for instance Aghion et al, 2022).…”

“…To the best of our knowledge, only two other articles try to combine these streams of work, as we do: Pan et al (2022) and Aghion et al (2022). 2 While these authors also add financing costs to a model of clean directed technical change, our focus differs from theirs.…”

“…2 While these authors also add financing costs to a model of clean directed technical change, our focus differs from theirs. Pan et al (2022) discuss the role of clean innovation in the recovery period after the COVID-19 pandemic, whereas Aghion et al (2022) analyses differences in the longrun rate of patenting of clean technologies between the EU and selected peers and across EU member states, and how these relates to cross-country differences in venture capital investments. On the contrary, we are interested in the dynamic interaction between climate policies and financing conditions for different technologies.…”