Abstract:
Innovation is widely believed to play an important role in addressing climate change. Nevertheless, estimating such effects is difficult due to the endogeneity of innovation measures. I use a novel shift-share instrument building from cross-border patent citations to deal with this endogeneity. Using data for 27 European countries across 20 manufacturing industries from 1995-2019, I find evidence of significant endogeneity bias that overstates the causal effect of patents on emissions. Further, if anything, it seems that new non-green patents may increase emissions. This then suggests that relying on new technologies alone to solve the climate crisis is potentially ineffective.
