Technological innovation and the environment: an analysis based on patent counts

Abstract: The increasing concern on the present and future impact of climate change has raised the attention on the relationship between technology and the environment. The aim of this paper is to investigate the impact of green innovation on carbon emissions. Carbon dioxide (CO2) and Greenhouse Gas (GHG) emissions per capita are used as a proxy for environmental quality. Technological innovation is measured by the number of climate change mitigation patents granted for each country disaggregated by areas of innovation. The estimation strategy entails the use of an OLS with two-way fixed effects for a panel of 47 countries over the period 1976-2012. Overall, we find evidence of a positive relationship between carbon emissions and technological innovation, i.e. pollution can be reduced by adopting new energy efficient technologies. However, the results differ depending on the type of patent variable used. Furthermore, the results vary when the sample is divided into developed and developing countries. Interestingly, the additional regressions show a significant impact of innovations only for the high-income economies sample. These findings can be used to draw policy implications. Given the recent forecast of future increase in carbon emissions, it is paramount to further improve technologies to decouple economic growth from environmental pollution. Moreover, technology transfer between developed and developing countries must be fostered to increase the global effort in pollution reduction.