Abstract
The climate crisis and the global economic impact of the Covid-19 crisis occur against a background of slowing growth and widening inequalities, which together imply an urgent need for a new environmentally sustainable and inclusive approach to growth. Investments in “clean” innovation and its diffusion are key to shaping this, accompanied by investments in complementary assets including sustainable infrastructure, and human, natural and social capital which will not only help achieve net-zero greenhouse gas emissions, but will also improve productivity, living standards and the prospects of individuals. In this article, we draw on the theoretical and empirical evidence on the opportunities, drivers and policies for innovation-led sustainable growth. We highlight the importance of a coordinated set of long-term policies and institutions that can enable and foster private sector investments in clean innovation and assets quickly and at scale. In doing so, we draw inspiration from Chris Freeman's work on the system-wide drivers of innovation, and his early vision of achieving environmental sustainability by reorienting growth.
Highlights
The climate crisis and the global economic impact of the Covid-19 crisis have occurred against a background of slowing growth and widening inequalities
Conclusions for action: The theoretical evidence suggests that action at scale and across the economy, via a coordinated set of policies and institutions, is required in order to tackle the multiple market failures that coexist, and shift the trajectory of economies so that path depen dence favours clean innovation and investment
Given the devastating environmental and substantial economic costs of locking-in to dirty as sets and infrastructure, time scales and rates of change must be at the centre stage of policy assessments
Summary
The climate crisis and the global economic impact of the Covid-19 crisis have occurred against a background of slowing growth and widening inequalities. This article examines ideas and evidence on how policies and in stitutions can enable and foster private sector investment in sustainable and productive assets at the scale and pace required to tackle climate change and simultaneously achieve a strong economic recovery and growth into the future.1 While our focus is on policies in high-income economies operating on the global innovation frontier, interactions with and implications for sustainable development in poorer countries are highlighted.
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