Do Investments in Clean Technologies Reduce Production Costs? Insights from the Literature

In response to growing environmental concerns, governments have encouraged innovation and adoption of green or clean technologies through various policy measures. At present more than half a trillion US$ is being invested annually in clean technologies. This study analyzes if investments in clean technologies increase productivity and reduce production costs based on the existing literature. The findings are, however, mixed. Most ex-post studies show a positive relationship between clean investments and energy-intensive manufacturing firms’ productivity. In transportation, buildings, and power sectors, empirical evidence between the adoption of clean technologies and the cost of energy services is highly limited. Ex-ante studies find cleaner vehicles that use electricity or hydrogen are still more expensive than gasoline and diesel vehicles, while in the buildings sector, clean technologies reduce the cost of energy services. In the power sector, increased investments in renewable energy have not yet decreased the average costs of grid electricity supply.