Climate vulnerability and green innovation: A cross-country analysis

Abstract

This study contributes to the growing literature on environmental innovation by offering novel cross-country evidence on how climate vulnerability shapes green innovation. While existing research has extensively examined the influence of regulatory frameworks, market forces, and technological capabilities on green innovation, the role of climate vulnerability remains underexplored. This paper fills this critical gap by analyzing how countries’ exposure, sensitivity, and adaptive capacity to climate change affect their capacity to generate environmentally sustainable technologies. Leveraging a panel dataset of 85 countries from 2000 to 2021, this study integrates multidimensional climate vulnerability indicators from the ND-GAIN data with patent-based measures of green innovation from Climate Watch, providing a global empirical assessment of how climate stress can drive technological adaptation. As for empirical methodology, this study employs fixed effects, system generalized method of moments, and bias-corrected least squares dummy variable estimators to address potential endogeneity and dynamic persistence in innovation. The analysis reveals four key findings. First, climate vulnerability significantly stimulates green innovation, with a one-point increase in the vulnerability index associated with an 18.3% rise in green patents. Second, this effect is amplified by heightened public awareness, highlighting the role of demand-side drivers. Third, the relationship is more pronounced in developing and low and middle-income countries, where innovation is often necessity-based. Finally, the findings underscore the importance of climate-resilient innovation in advancing Sustainable Development Goals 9 and 13. By uncovering how climate stress as a driver of innovation, this study makes a substantive contribution to climate economics and innovation policy research.

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