The European Central Bank published Working Paper No 3027 by Vincent Labhard and Jonne Lehtimäki analysing how climate-change policies and technologies diffuse across countries and how that diffusion interacts with institutions and governance. The paper finds that higher-quality institutions and governance are associated with both greater speed and wider spread of diffusion, and argues that distinguishing “speed” from “spread” is essential for assessing the green transition. The authors note the paper does not represent the views of the European Central Bank. The analysis applies a standard S-curve diffusion (contagion) model to 1996–2020 panel data for 20 European Union countries and 40 countries covered by the OECD Environmental Policy Stringency (EPS) index. It uses proxies including environmental and climate-related technology patents, CO2 emissions per capita, environmentally related tax revenues, and the composite EPS measure of policy stringency (covering taxes, trading schemes, emissions limits and technology support and adoption policies). Reported results indicate more consistent institutional and governance effects for technology diffusion and for the EPS index than for narrower policy proxies, and the paper also breaks down which governance dimensions (process, capacity and respect) are most closely associated with diffusion outcomes across samples.
European Central Bank 2025-02-14
European Central Bank working paper links institutional quality to faster diffusion of climate policies and technologies
The European Central Bank's Working Paper No 3027 analyzes the diffusion of climate-change policies and technologies across countries, highlighting that higher-quality institutions and governance enhance diffusion speed and spread. The study uses a standard S-curve diffusion model on 1996–2020 data, emphasizing consistent institutional effects on technology diffusion and the OECD Environmental Policy Stringency index.