Green R&D Cycles, Innovation Disruptions, and the Interplay of Sustainable Growth and Pollution Emission Trends

This paper develops a simple dynamic endogenous green growth model to understand how cyclical green R&D stock affects green economic growth and pollution emissions. The green model has four distinct features. First, over time, long-term growth is achieved through eco-friendly innovation driven by the evolving trends of net green R&D. Second, green innovation results from the entrepreneurial investment in green R&D stock. Third, new green innovation replaces old, dirty technologies with improved, clean technologies. Fourth, persistent engagement in green innovation brings a pollution reduction. The theoretical implication of the model includes (a) the difference between desired green R&D and current R&D stocks brings cyclical dynamics in green innovation; (b) if current green R&D stock is less than desired green R&D stock, then positive shocks to green innovation increase green economic growth; (c) if current green R&D stock is more than the desired green R&D stock, the negative shocks to green innovation may decrease green economic growth; (d) if the net green R&D is more than zero, then the positive shocks to green innovation helps to mitigate pollution emissions; (e) if net green R&D is less than zero, then negative shocks to green innovation increase pollution emissions.