December 9, 2021

Green innovation policies: a literature and policy review

Green, low-carbon technologies are much needed for an effective and efficient energy transition. For example, hydrogen, heat pumps, and completely new technologies may replace the current carbon-rich and dirty ways in which we produce and consume. However, investments in green innovation still pay off too little. Governments can directly stimulate the development and wider use of green technologies.

Based on a literature review, this report examines how governments can promote green innovation. It shows that two types of arguments play a role in thinking about green innovation policy: market failures and missions. Governments can stimulate green innovations with a targeted innovation policy. It also helps to price damage to the climate and the environment.

The study also considers green innovation policy in the Netherlands. The Netherlands spends substantial amounts to promote innovation in general and to foster the adoption of existing green technologies. However, instruments to specifically stimulate the development of new green technologies are modest in size.