Will the next major innovations in finance be "green"?
The European Central Bank pushed a Financial Markets and Green Innovation discussion paper to describe the state of green innovation in the EU, discuss how it can be fostered and by whom.
Their conclusion to support the emergence of "green" technologies include:
- Patent "green" technologies, as countries like the USA and Japan have a long-run rate of patenting respectively 3 and 4 times high in this field.
- Introduce carbon taxes, as only 11 EU countries have implemented this kind of system as of late 2021, at levels below that recommended by economists.
- Invest in R&D, especially by increasing investment level in private equity and venture capital financing and providing subsidies for projects in "green" applied science.
- The role of central banks is limited, as their primary mandate is that of ensuring market stability and controlling risks while remaining neutral.
- Banks have no material contribution to innovation in green technologies that could lead to the transmission of central banks' policies to the real economy.
The ECB states that it can "at best play a supportive role" in the emergence of "green" technologies and that innovation rather requires "bold government action".