The Green Wave Crash: Why Did Clean Technology Patenting Drop After 2010?

Decoupling economic growth from greenhouse gas emissions is the only way to avoid catastrophic global average warming levels above 2 degrees compared to pre-industrial levels, without forgoing economic growth. According to the IPCC (2018), greenhouse gas emissions must be reduced to net zero by 2050 to mitigate the worst effects of climate change. Innovation in low-carbon technologies and their widespread diffusion are essential if this goal is to be met without inflicting vast damage on the economy and, consequently, livelihoods (e.g. Stavins 2007, Anadon and Holdren, 2009; Popp et al., 2010). As the window for effective global warming mitigation measures gradually closes (IPCC, 2018), low-carbon technology innovation is more important now than ever. Why then, has there been a drop in the share of low-carbon technology patents after almost two decades of sustained growth? Understanding the causes of the drop in clean innovations is a key prerequisite for developing an appropriate policy response that could remedy the problem. The aim is to establish a credible link between the observed decline and its causes. Using a newly compiled dataset, we explore the most compelling explanations for the observed decline in clean innovation found in the literature, namely credit constraints, energy prices and environmental policy stringency. Which of these drivers plays the most important role will determine which policy is best suited to reverse the trend.