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Government Intervention Required to Drive “Green” Technology

AABHlostconsumptionInstead of focusing on carbon pricing, policymakers need to encourage innovation and investments in “green” research and development through subsidies, according to a new policy report from Bruegel and Harvard economists. The report also reveals that delaying clean innovation policies will result in much higher costs in the years ahead.

The report, “No green growth without innovation” (PDF), indicates that carbon prices would have to be about 15 times higher in the first five years and 12 times higher in the next five years if innovation is not properly subsidized by governments.

The report shows that the shorter the delay in government subsidization and the higher the discount rate, the lower the long-term costs will be (see chart).

Reinhilde Veugelers, a senior research fellow at Bruegel, cited figures from the World Intellectual Property Organization that revealed that only 2.2 percent of all patent applications between 2000 and 2006 were for environmental applications, reports the New York Times’ Green Inc. blog.

The report shows the need for much greater government intervention in the form of subsidies for research and development, as well as provides several recommendations for developing incentives for green growth in the private sector, according to the Green Inc. blog.

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