OECD work combining firm- and sector-level data, covering 19 countries over the period from 1990 to 2015, shows that climate policies are effective at inducing innovation in low-carbon technologies in regulated sectors. However, climate policies do not seem to induce significant low-carbon innovation in the other parts of the supply chain across regulated sectors. OECD analysis shows that climate policies have not majorly impacted firms’ competitiveness, and that clean innovation may enable firms to compensate in the short run, for the potential costs implied by new environmental regulations.

The OECD investigates how changes in environmental policy stringency affect productivity growth at the economy, industry and firm level. At the aggregate economy level, environmental policy stringency does not significantly impact productivity growth. At the industry level, a tightening of environmental policy is associated with a short-term increase in industry-level productivity growth, for the most technologically advanced countries and industries. This effect increases with respect to the current productivity level of industries. At the firm level, the technologically most advanced firms experience productivity growth under tightening of environmental policies, while a third of firms, the less productive ones, experience a slowdown in productivity.