Fact of the Week: A 1 Percent Increase in Patents Leads to a 0.08 Percent Decrease in Carbon Emissions
Source: Saima Ashiq et al., “Impact of Innovation on CO2 Emissions in South Asian Countries,” MPRA Paper, University Library of Munich, Germany, no. 118760 (October 2023).
Commentary: A new working paper by Saima Ashiq et al. analyzed the effect of innovation on carbon emissions among South Asian nations. In particular, the study focused on Bangladesh, India, Nepal, Sri Lanka, and Pakistan, between 1980 and 2019. The authors measured innovation using patent applications and trademark applications. They also incorporated data on energy consumption, foreign direct investment (FDI), GDP per capita, and exports in their model and analysis. All data came from the World Bank’s World Development Indicators database.
When looking at the effects of innovation, a 1 percent increase in the number of patent applications was associated with a decrease in carbon emissions of about 0.08 percent. Trademark applications seemed to have a larger effect, with a 1 percent increase in trademark applications leading to a 0.12 percent decrease in carbon emissions. Interestingly, FDI did not have a significant effect on carbon emissions. The authors explain that while foreign investment may sometimes go to industries that have a high carbon footprint, it can also help facilitate transfer of green technologies and associated knowledge. They also found a similar result with trade openness, measured as goods and services exports as a percentage of GDP. They argue that while increased openness to trade may increase carbon emissions from particular economic activities, trade may also facilitate transfer of green technology. These findings support the growing body of evidence about the efficacy of innovation in reducing carbon emissions and in mitigating other forms of environmental damage. As such, countries looking to prioritize environmental sustainability should put investment and innovation in green technologies at the center of such efforts.
