Climate change is the most pressing challenge facing the world today. By now, there is a general consensus that human economic activities which emit greenhouse gases such as CO2 contribute to climate change. This means that the world’s most pressing challenge is rooted in economic growth.

The “Green innovation to fight climate change project” research program proposes innovation as a promising way to address climate change. Its central tenet is that, through innovation, economic growth can be achieved while fighting climate change. But for the right type of innovation to take place, incentives must be aligned in both the private and the public sectors.

With this in mind, the project aims to understand the role of the State, civil society and the market in the energy transition towards clean technologies. It aims to specify how these different actors could, together, encourage companies to redirect production and innovation towards clean technologies. Within the framework of the Schumpeterian approach, the goal will be to identify the optimal micro- and macroeconomic factors involved, such as the price of carbon, subsidies for green innovation, the use of less polluting energy sources (particularly nuclear), the role of investors, and the place of the consumer. The project is divided into seven sub-projects and is particularly interesting for (re)insurance companies from an asset management point of view. It also showcases the key role played by technical progress – and therefore innovative growth – in the fight against global warming.
 

The fields of research and technical cooperation concerned include:

•    Environment and Resource Economics; 
•    The Economics of Growth and Innovation; 
•    The Economics of Entrepreneurship and Firm Dynamics; 
•    Macroeconomics and Irreversible Investments; 
•    The Economics of Industrial Policy and Competition.

Within the Collège de France, the researchers will cooperate with chemists and lawyers also working on energy transition, with whom they plan to organize joint workshops and to generate collaborative research projects.

More details on the seven sub-projects comprising “Green innovation to fight climate change”:
 

1. The first project will look at the design of climate policy in the context of production networks and production chains. In particular, it will study the optimal tax and subsidy policies to foster green innovation and the extent to which the emphasis should be put on upstream (production input) versus downstream (consumption) sectors.
    

2. The second project will look at the interplay between green innovation and international trade. The objective of this research project is to investigate the causes of the decline in domestic carbon emissions (CO2) of French manufacturing companies. It will then consider two alternative mechanisms that could explain the observed domestic decline in GHG emissions: innovation to green production processes or the relocation of polluting activities in other countries.
    

3. The third project will investigate the role of intermediate sources of energy such as natural gas and nuclear, which are less desirable than renewable energy but less polluting than coal, in the energy transition process towards fully clean energy sources.
    

4. The fourth project will look at the interplay between structural change – from agriculture to industrialization and then from industrialization to services – and CO2 emissions in emerging countries: services are far less polluting than industrial production; then, to which extent can one reduce the growth in CO2 emissions worldwide by making it easier for developing countries to bypass mass industrialization?
    

5. The fifth project will use World Value Survey data and firm level data to look at the role of consumers and civil society, together with market institutions, to induce firms to produce and innovate cleaner: can we compute a carbon tax equivalent of this alternative tool?
    

6. The sixth project will study how one can reduce carbon emissions by changing the composition of consumption, rather than (or in addition to) changing the underlying production processes, that is focusing on the demand-side instead of the supply-side.
    

7. The seventh project will explore the interplay between climate change and macroeconomics. Climate Change and climate policy action were long regarded as long-term, fundamentally intergenerational issues. Heightened emergency and the acceleration or policy responses that it implies force us to reconsider. Climate has become a major macroeconomic issue, with implications for growth, macroeconomic volatility, financial stability, labor markets, inequality and public finances that the project proposes to investigate.