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Climate-saving invention

A doubling of ‘green’ patent filings will lead to a 4.8 percentage point boost in real GDP growth, says study for KPMG authored by University of Cambridge economists including Kamiar Mohaddes of Cambridge Judge Business School.

The Canopy of a Forest with a Hole Shaped like a World Map.
Kamiar Mohaddes.
Dr Kamiar Mohaddes

A sustained yearly doubling of green patent filings will lead to a significant increase of 4.8 percentage points in real GDP growth, says a new “greenovation” paper by three University of Cambridge economists in a report for KPMG.

This compares with a GDP gain of 3.4 percentage points if non-green patents alone are doubled yearly, says the report, which coincides with the gathering of world leaders this week at the COP26 climate-change summit in Glasgow.

“This report shows that green innovation can deliver economic growth that is equal to – or greater than – the impact of non-green innovation,” says the report. “Our findings make clear that green investments can improve the economy beyond their expected environmental benefits”.

The report is based on data covering universe of all patent filings from 1990-2018 for 43 OECD and BRICS countries (Brazil, Russia, India, China and South Africa), which over the past three decades accounted for 89% of world real GDP and 97% of total and green patent filings.

From 24 million patent filings analysed, filings were separated into “green” and “non-green” through reference to the Cooperative Patent Classification tag related to climate-change mitigation technologies. Seven countries – China, France, Germany, Japan, South Korea, the UK and the US – filed about 70% of total and green patent applications.

Most of the extra growth from green patent filings comes from innovation in industries such as energy generation, buildings and transport. The sustained innovation in these industries has led to long-run output and employment growth particularly concentrated in the services sector.

The report funded by KPMG – entitled Greenovate for a Better Environment and Economy – reflects the views of the three authors:  Zeina Hasna, a PhD student in the Faculty of Economics at the University of Cambridge; Henry-James Hatton, an MPhil student in Economic Research at the University of Cambridge, and Dr Kamiar Mohaddes, Associate Professor in Economics & Policy at Cambridge Judge Business School and Fellow at King’s College, University of Cambridge.

“Given decades of procrastination and signs of falling short on ambitious Paris Agreement targets, the world needs to act fast on reducing emissions. With the role of green innovation in reducing climate change clear, this report argues that green innovation can also improve economic activity,” the authors conclude.

The report also highlights the role governments have played in driving success among major innovating countries and renewable energy businesses, concluding: “Prospects for a sustainable recovery and achieving Paris targets hinge on government actively encouraging green innovation, facilitating regulations and increasing investments.”

In a Foreword to the report, Gary Reader, Global Head of Clients & Markets, KPMG International, said:

“The planet now stands at a historic crossroad as the profound and unmistakable impact of climate change continues to threaten humanity’s very future. Alarming evidence of this global crisis continues to emerge with growing ferocity by the day. And there is no denying that the business community and its leaders possess the ability – and share the responsibility – to act without delay.”

“The encouraging news is that so many of today’s businesses are recognising both the pressing need for dramatic change and the significant role they can play in the race to drive progress.”