Uncertainty and innovation in renewable energy

Abstract

This paper empirically investigates the impact of economic and policy uncertainty on green innovation for a sample of 81 advanced and emerging market economies during the period 1976–2020. Our results show that increases in uncertainty lead to a long-lasting decrease in green innovation, measured by the number of new green energy patents. This effect holds for a wide set of technologies, it is larger during recessions and periods of higher financial stress, and in countries with less stringent environment protection regulations. Importantly, the effect of un- certainty on green patents is larger than on non-green patents. Results are robust to several sensitivity tests, including an instrumental variable approach and a difference-in-differences strategy.