University of Oxford - Institute for New Economic Thinking at the Oxford Martin School; University of Oxford - Smith School of Enterprise and the Environment
University of Oxford - Oxford Martin School
Date Written: December 22/12/2017
Republished here with permission from the authors 14/01/2019
This paper studies countries' productive capabilities relevant to the green economy. We pool all existing environmental goods classifications to create a new, comprehensive dataset of 293 green products traded between 1995 and 2014. We match these products to export data and analyse resulting patterns in the trade network using the economic complexity methodology. We construct the Green Complexity Index (GCI), which ranks countries in accordance with the number and complexity of green products they export competitively and show that countries with higher GCI have higher environmental patenting rates, lower CO2 emissions, and more stringent environmental policies. We then look at each country's Green Adjacent Possible (GAP), which represents the set of proximate green products that a country could potentially become competitive in. Using the GAPs, we construct a measure of each country's Green Complexity Potential (GCP), which we show is predictive of countries' future competitiveness in green products. The strong correlation between GCP and GCI suggests path dependence in the accumulation of green production capabilities and shines a light on policy discussions around green industrial policy.
Keywords: Economic Complexity, Green Economy, Trade, Exports, Green diversification, Industrial Policy