How markets will drive the transition to a low carbon economy

Martina K. Linnenluecke, Jianlei Han, Zheyao Pan, Tom Smith*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

33 Citations (Scopus)


This paper investigates the driving factors behind the transition to a low carbon economy. Here, we offer a two-part analysis: First, we examine the factors leading to the current level of cleantech development. To do so, we examine the impact of country-level economic variables (real GDP, market return, and turnover) and country-level institutional variables on patent intensity. Results from this analysis show that cleantech patenting activity is fostered by a supportive institutional environment that promotes innovation and low-carbon development through carbon pricing policies, country-level public R&D expenditure and human capital. Second, we extend the notion of ‘path creation’ to map out different pathways for cleantech development on a country-level within a real options framework, and offer a corresponding valuation of cleantech patents. Our estimates of total wealth creation through the development of cleantech patents by 2050 range from US$10.16 to US$15.49 trillion dollars (13%–20% of the world GDP in 2017) with investment growth from US$2.93 to US$3.71 trillion (3.7%–4.7% of the world GDP in 2017). The results from our analysis suggest that market forces will drive the transition to a cleantech economy.

Original languageEnglish
Pages (from-to)42-54
Number of pages13
JournalEconomic Modelling
Early online date19 Jul 2018
Publication statusPublished - 1 Mar 2019


  • Clean technology
  • Commercialization
  • Low carbon economy
  • Markets
  • Patents
  • Transition


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