This report addresses the role of innovation in green growth strategies, and is a contribution to the OECD Green Growth Strategy. The OECD Council Meeting at Ministerial Level (MCM) adopted a Declaration on Green Growth on 25 June 2009, which invited the OECD to develop a Green Growth Strategy. Green growth means fostering economic growth and development while ensuring that natural assets continue to provide the resources and environmental services on which our well-being relies. The OECD Green Growth Strategy was released at the May 2011 OECD Council Meeting at Ministerial Level (MCM), where it was welcomed by Ministers.

Green growth means fostering economic growth and development while ensuring that natural assets continue to provide the resources and environmental services on which our well-being relies. Increasing concern about the future sustainability of economic growth patterns underpin the demand for a greener model of growth. Existing production technology and consumer behaviour can only be expected to produce positive outcomes up to a point; a frontier, beyond which depleting natural capital has negative consequences for overall growth. By pushing the frontier outward, innovation can help to decouple growth from natural capital depletion. Innovation and the related process of creative destruction will also lead to new ideas, new entrepreneurs and new business models, thus contributing to the establishment of new markets and eventually to the creation of new jobs. Innovation is therefore the key in enabling green and growth to go hand in hand.

This chapter examines the role of innovation in green growth strategies. It first explores why innovation is important for green growth, what types of innovation are important and how green innovation could affect growth performance. It then examines the rationale for policies to strengthen green innovation and the specific barriers that influence the rate of green innovation. And finally, it examines the current state of green innovation, by examining available indicators on green innovation, including indicators on patenting, venture capital and financing, as well as available information on non-technological innovation and the development of green business models.

This chapter examines in detail the main factors and policies that influence green innovation. This includes the broader framework for innovation, which was explored in the detail in the OECD Innovation Strategy, as well as factors and policies that can shift the direction of innovation towards greener products, services and processes. Such policies include measures on the supply-side such as investment in research and development, government support for the development and introduction of green technologies, as well as policies to foster information and communications technology, biotechnology and nanotechnology. Demand-side policies, such as policies to diffuse innovations more widely, strengthen the markets for green innovation, e.g. through public procurement, as well as consumer policies are also explored in the chapter. A final section discusses how governments can foster a whole-of-government approach to green innovation.

This chapter explores some broader policy considerations relevant to green innovation policies, This includes how to establish an appropriate mix of policies for green innovation, the timing and efficiency of green innovation policies, as well as some considerations on how countries can derive benefits from green innovation at the local and national level.