Innovation and the international diffusion of environmentally responsive technology ¹

New evidence is presented on environmental innovation and diffusion over the 1970s and 1980s. At a global level, a substantial amount of innovations occurred. In the United States, Japan, and Germany, the share of environmental patents in all patents varied between 0.6 and 3%, and as such was higher than the corresponding share of pollution abatement expenditure in GDP. Japanese environmental innovation rates were consistently high. Certain plausible connections between environmental regulation and innovation also emerge. Across these three countries and over time, innovation responded to pollution abatement expenditure, an indicator of the severity of environmental regulations. Environmental patenting rates in developing countries were also high, reaching 2% in many years in Brazil. Developing country innovators obtained a non-trivial number of patents, most of which appear geared towards adapting imported technologies to local conditions. However, domestic innovation was only one path to new technologies. 'Imports' of disembodied environmental technologies (foreign patents registered in developing countries) were substantial. Foreign patents were typically 'important' or generic patents; evidence also suggests that such patents protected intellectual property in equipment exported. Developing countries, especially in East Asia, often chose to obtain technologies embodied in pollution abatement equipment.