Green innovation and the CO2 emissions gap: New evidence from OECD economies

Abstract

Carbon emissions are highly concentrated within societies; however, little is known about how technological change relates to this distribution. This study examines the relationship between directed technological innovation and intranational carbon inequality in OECD economies. Building on a framework that incorporates heterogeneous emitters, consumption-based footprints, and rebound effects, we distinguish between the scale and direction of innovation and employ the pooled Bewley estimator to identify long-run relationships in an unbalanced panel of OECD economies over 1990–2021, while accounting for slope heterogeneity and cross-sectional dependence. The results show that environment-related technological innovation is significantly associated with a narrower carbon emissions gap; a 1-percentage-point increase in the share of green technologies in domestic patenting corresponds to a 0.5%–1.4% lower level of carbon inequality. In contrast, aggregate patenting activity shows no systematic relationship with the emissions gap. Per-capita income follows an inverted-U pattern with the emissions gap, consistent with an Environmental Kuznets Curve interpretation, whereas urbanization is negatively linked to the gap, possibly reflecting diffusion and agglomeration channels. Trade openness shows a weak and inconclusive relationship. Overall, the findings suggest that the composition of technological progress, rather than its aggregate scale, is more closely linked to the distributional dimension of decarbonization. Policies that steer innovation toward low-carbon technologies may therefore contribute not only to emissions reduction but also to a more even distribution of emissions responsibilities in advanced economies