Green Innovation Policies - David Hémous

Climate change already has a negative impact on the environment and our societies, and this impact will get worse over the course of this century. How much worse? This will depend on our ability to reduce greenhouse gas emissions. Achieving the necessary reduction in emissions, while maintaining (and improving) worldwide living standards can only be achieved through innovation. Fortunately, innovation is not manna from heaven; it is conducted by scientists and firms and it reacts to market and policy incentives. It is therefore up to governments to steer it toward clean technologies.
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In this public paper, UBS Foundation Professor David Hémous reviews recent economic research on the role of innovation in the design of climate policy. After a quick introduction to the challenges posed by climate change, I will show that current technological trends - though promising - are unlikely to be sufficient to limit warming to 2°C. Can policy then effectively boost green innovation? Recent evidence shows that this is definitely the case. How should global climate policy be designed to leverage this innovation response? What about unilateral policies? Some innovations are “grey”: they permit the replacement of particularly dirty technologies with less dirty but still polluting ones. The shale gas revolution is an example. Can these “grey” innovations backfire?
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David Hémous is a macroeconomist working on Economic Growth and Innovation. His work highlights the fact that innovation responds to economic incentives and that pub- lic policies should be designed taking this dependence into account. In particular, he has shown in the context of climate change policy that innovations in the car industry respond
to gas prices and that global and regional cli- mate policies should support clean innovation to efficiently reduce CO2 emissions. His work on technological change and income distribu- tion shows that higher labor costs lead to more automation, and that the recent increase in labor income inequality and in the capital share can be explained by a secular increase in automation. He has also shown that innova- tion affects top income shares. His work has been highlighted in several newspapers and magazines including ‪@lemondefr‬, ‪@TheEconomist‬, ‪@WashingtonPost‬ or ‪@Forbes‬, and it has been presented in policy circles such as COP 15 conference in Copenhagen or the French parliamentary meetings.
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