innovation. While these are unlikely to be captured in international patent data,<sup>10</sup> they are reflected in the production and trade of ̳green‘ goods and services, to the extent that green technologies are embodied in a good or service.<sup>11</sup> As shown in Figure 5, environmental goods constitute a non-trivial and rising share of high-income country exports. The share of green exports is slightly lower in most developing regions - but the gap is nowhere near as large as with frontier innovations. However, with the exception of EAP, the share of green exports has not been rising, suggesting that new firms are not entering these sectors.<sup>12</sup> The policy implication of this observation depends on the extent to which this reflects some under-exploited comparative advantages in specific developing countries accounting for lower levels of home production and export of green goods and services. Any policy intervention should be predicated on better information on the sources of this under-exploitation, whether driven by specific market or policy failures. For instance, information on the extent to which the relatively less developed state of environmental regulations in many developing countries may be accounting for these differences could suggest appropriate policies.

**Figure 5: Export of Green Goods and Services** (as % of all exports)

<!-- Start of picture text --> 7%<br>6%<br>5%<br>4%<br>3%<br>2% 2000<br>1%<br>0% 2005<br>2010<br>Source: COMTRADE + OECD List of environmental 6-digit HS categories<br><!-- End of picture text --> Figure 6 shows that green imports are as important (as a share of all imports) in developing regions as they are in high-income countries. This indicates the international transfer of green technology as embodied in green consumption goods. Further, inasmuch as some of these green goods are used as inputs, this also indicates the ̳greening‘ of the input mix, which may reflect adoption and adaptation of

> 10 The lack of good data to measure the diffusion of existing green technologies that lack sufficient global novelty for patenting, beyond product-level trade data, is also highlighted by Popp (2011). Dechezleprêtre et al. (2010) use green patent applications data to analyze the international diffusion of patented inventions (the number of patents invented in Country A and filed in Country B) as an indicator of the number of innovations transferred between these countries – an interesting empirical exploration of a small part of diffusion but a poor proxy for broader technology diffusion and adaptation across and within countries.

> 11 Details of our measurement of green trade are given in the data annex. Note that the underlying technologies embedded in these green goods and services are much broader than in the patent discussion, which look only at GHG mitigation technologies. These trade-based results are therefore not directly comparable to the patent results. Note also that an increase in a country‘s aggregate output of a green product does not necessarily reflect an innovation since it could be by firms already producing that good. Nonetheless, changes in aggregate green output are correlated with the introduction of new-to-the-firm green goods.

> 12 This is true even when looking at the absolute volume of green exports.

8