Abstract
Which countries are likely to have the productive capabilities to thrive in the green economy? How might countries reorient their existing industrial structures to be more competitive in an environmentally friendly world? To investigate these questions, this paper develops a novel methodology for measuring productive capabilities to the green economy. By constructing a new comprehensive dataset of traded green products and drawing on economic complexity methods, we rank countries in terms of their ability to export complex green products competitively. We show that higher ranked countries are more likely to have higher environmental patenting rates, lower CO2 emissions, and more stringent environmental policies even after controlling for per capita GDP. We then examine countries' potential to transition into green products in the future and find strong path dependence in the accumulation of green capabilities. Our results shed new light on green industrialisation and have a number of implications for green industrial policy.
Highlights
Pollution, environmental degradation, and biodiversity loss used to be viewed as unavoidable consequences of economic growth
We find a strong positive correlation between countries’ Green Complexity Potential (GCP) and Green Complexity Index (GCI), which suggests a high degree of path dependence of the accumulation of green production capabilities
Before presenting our results on green production capabilities, we first look at the total volume of trade green and renewable products represent and how this has changed over time
Summary
Environmental degradation, and biodiversity loss used to be viewed as unavoidable consequences of economic growth. We create a new measure—the Green Complexity Index (GCI)—which aims to capture the extent to which countries are able to competitively export green, technologically sophisticated products, and allows us to estimate which countries are likely to be leaders and laggards in the green economy. By applying relatedness measures developed in Hidalgo et al (2007) to our dataset of green products, we construct each country’s GAP and illustrate specific green export opportunities for a selection of countries. Our new GCI, GAP and GCP measures provide novel additions to existing literature that has sought to quantify countries’ green competitiveness (Fankhauser et al, 2013), innovation (Dechezleprêtre et al, 2014; Sbardella et al, 2018), and green diversification opportunities (Fraccascia et al, 2018; Hamwey et al, 2013; Huberty and Zachmann, 2011). The Appendix contains more information about the data sources (A.1), green products and their relatedness (A.3 and A.5), countries and green exports (A.2 and A.4) and gives further regression robustness checks (A.6)
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