The acting director of green hydrogen at Namaqua Engineering, looks at the solar panels in Vredendal, South Africa, November 15, 2022.

Publication Type

Green innovation and the transition toward a clean economy

Daron Acemoglu (Massachusetts Institute of Technology), Philippe Aghion (Collège de France; INSEAD; London School of Economics and Political Science), Lint Barrage (ETH Zurich ) and David Hémous (University of Zurich )

Working Papers 23-14
Photo Credit: REUTERS/Esa Alexander


To combat climate change without sacrificing long-term economic growth, innovation must be redirected toward green technologies. The authors review recent literature that has developed a directed technical change framework where innovation can be endogenously targeted either toward fossil-fuel enhancing technologies or clean energy sources (such as renewables). They provide empirical evidence of path dependence in firms’ choice between green and dirty innovation. They then draw implications of this path dependence for the design of environmental policy and for economic growth. In particular, they show that their framework has distinctive implications regarding unilateral environmental policies, international cooperation, the use of intermediate energy sources such as natural gas, and the role of civil society.

Data Disclosure:

This publication does not include a replication package.

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