Assessing the impact of climate and green industrial policy mixes on eco-innovation

This study investigates the relationship between variations in the design of climate policy mixes and their impact on environmental innovation (EI). Specifically, it theoretically explores the interplay of these policy design factors and their potential influence on EI before empirically examining whether larger policy mixes, a greater diversity of policy instruments, and an increased emphasis on green industrial policies contribute to a higher share of environmentally related patents. By integrating insights from the literature on EI and policy mixes, this research develops a systematic approach to capturing the dynamics of climate policy mixes and is the first to separately analyze the distinct role of green industrial policies. The study examines policy mixes across 13 OECD countries (Australia, Belgium, Canada, Finland, Germany, Greece, Italy, Ireland, Japan, New Zealand, Norway, Portugal, Sweden) from 1990 to 2020, using a Bayesian hierarchical model and a novel dataset, CLIMAPP, to map policy design variations. The results indicate that the overall size of a climate policy mix is the strongest predictor of a higher share of EI, while policy diversity and the emphasis on green industrial policies do not play a significant role. Furthermore, the findings highlight a previously underexplored aspect: the operational logic of green industrial policies has remained largely unchanged over the past decades, potentially limiting their ability to drive radical innovation.