Productivity in the Face of Climate Change

Article published in the Economic Review of 2024

Stricter climate legislation is initially harmful to productivity, especially for high-emission firms, but spurs innovation and productivity growth in the long run. Success in green technology innovation depends on the type of firm and the regulatory framework. Market-based tools are less disruptive but may not drive innovation, unlike R&D subsidies. The transition to a carbon-neutral economy must be planned carefully in order to avoid lingering productivity costs.

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