How does climate vulnerability impact green innovation? A hindrance to sustainable development

In the face of escalating global climate change and mounting environmental challenges, the interplay between green innovation—a pivotal engine of sustainable development—and climate vulnerability is crucial for grasping global climate change adaptation and mitigation strategies. This study delves into the intricate relation between climate vulnerability and green innovation, utilizing panel data from 131 nations from 1995 to 2019. Our empirical analysis reveals that climate vulnerability significantly hinders green innovation. We further dissect the influence of various sub-sectoral dimensions of climate vulnerability, identifying that ecosystems, food, infrastructure, and water are vital contributors to green innovation. At the same time, habitat and health sectors are detrimental to it. Additionally, we examine the influence of economic and globalization heterogeneity, finding that climate vulnerability adversely impacts green innovation in non-OECD and low-to middle-income countries, with less pronounced effects in nations with higher economic sophistication. Notably, climate vulnerability poses a more significant barrier to green innovation in countries with lower globalization. Our research also indicates that corruption control and political stability can ameliorate the adverse consequences of climate vulnerability on green innovation. In contrast, income inequality and increased greenhouse gas emissions intensify these adverse impacts. This paper contributes to the literature by presenting novel cross-country evidence on the factors influencing green innovation, with a focus on the effect of climate vulnerability.