 Marcin is also a research associate, a CPR, a research advisor at ECB and co-editor of the review of asset pricing studies and the review of finance. And he is the former president of the European Finance Association. We have not seen the keynote speech. We know that this deals with the green finance. We are very excited to be listening to this keynote speech as is the audience. Thank you very much. The floor is yours, Marcin. Thank you very much for the kind introduction. It's a great pleasure to talk to you all. I wish I could be with you, sadly, teaching semesters are not always easy to coordinate around. So let me share the slides and hopefully this is going to be smooth. Okay, so what I want to talk to you about today is some of the recent research I have been conducting with my colleague Patrick Bolton and a student of our Set Imperial College, Moritz Wiedemann. And broadly speaking it fits in in a broader research agenda that I have been involved in over the last couple of years. And it relates to issues that European Central Bank and other central banks have been very involved in and it's the question of how to control the so-called climate change or climate crisis. Well, in general, we have more and more evidence from scientists telling us that this is a real problem. I think at this point, very few people question the fact that we observe some real changes in the atmosphere that are consistent with the idea that the planet is overheating. And the problem with that, of course, is that it may become a dire and dangerous for human livings. And as such, this is actually one of the key social issues that we need to deal with for the next decades to come. And it's kind of interesting to observe that the policy makers, the regulators have actually embarked on this mission. And I must say that European Central Bank is clearly one of the leaders in that particular space. The question always that becomes important is how do we address this problem? And the first thing to recognize is that one of the things that is potentially responsible for the global warming is essentially the scope of greenhouse gas emissions that we emit as a society. There is a pretty well-established evidence that these emissions are pretty much man-made. Any kind of naturally made emissions we can show are not really causally affecting the temperature changes. And what's important about these emissions, and this is due to the Nobel Prize winners from 2021, Hasselman and Manabe, is that there is actually a link that the more we emit, the more we are affecting temperatures. So in some sense as policy makers, we really cannot control temperatures directly, but we can definitely have an impact on the scope of emissions that these people are emitting into the atmosphere. So that has essentially created the framework that is called the decarbonization policies. There are quite a few of different decarbonization policies which largely concentrate on one specific goal, which is that the global emission levels should actually get reduced to something that is close to zero by a mid-21st century, which originally was kept at 2050. These days, this date is a little bit more flexible, but we still are talking about a similar time horizon to think about the emissions. So the question is, how do we go there? How do we go from the time when we currently emit 40 gigatons of emissions as a society to the world in which we emit zero? So there are many ways to think about it. The simplest way is to simply restrict economic activity. So we had a little bit of a natural experiment of that during the COVID episode in 2020. What we have actually done is global economy has pretty much reduced by 30% of its activity. And the result of that was essentially the decreases of emissions that we would like to observe for the next 30 years up to 2050. And of course, that's great because that's what the climate scientists would like to observe. But we also know that the consequences of the lockdowns that we had to impose on the society were actually quite severe. So the trade-off of how much you can actually stop the economic growth versus how much we want to reduce emissions is actually not obvious to everyone. So what's the alternative view that people hold? People think that we can kind of grow out of this problem through innovation. So this is a very popular view that essentially rather than producing energy using the fossil fuel intensive technologies, what we can aspire to have is the world in which we actually achieve the same kind of energy output without any greenhouse gas footprint. So that's what many people have been thinking about and they think that this is where the world should go. But essentially this process or this framework makes certain assumptions. Essentially what we are assuming here is that innovation in the green spectrum indeed leads to decarbonization. But in fairness, there is no really evidence that tells us that it should be a priori. So in some sense what I wanted to tell you about today is how much we can actually believe in that process based on the data that we already observed in terms of innovation and the decarbonization of different companies and different countries. So the perspective I want to show you today is going to be a global perspective where we are going to look at a large spectrum of companies in the world and we will try to see to what extent innovation in the green energy space potentially leads to some kind of response in terms of the decarbonization of this economies. So just to put some framework on this question, the kind of two views to think about this particular problem. The dominant view is the economist view, which essentially says that if we innovate more in the green space, that's going to translate to investment in green technologies. And what we are going to observe is the reduction in carbon footprint. And that was, for example, advocated by Philip Aguillon and co-authors. Recent paper by Loren Cohen and co-authors makes similar points. And implicit in this is the idea that so-called polluting firms or brown firms are going to change from carbon intensive production to renewable production, or alternatively they are going to improve efficiency of their brown technology such that the carbon footprint is kind of lower. So this is what this studies or this lead off literature postulates. But there is another view that is actually less emphasized that is something potentially interesting, which is the view that is consistent with something that economists call the Germans paradox. So essentially the idea is that if we come up with a very efficient technology, think about producing energy in a much more energy efficient way. Say companies that are using coal now are going to emit less in this process. What this is going to create is essentially increased demand for the product. And as such is no longer obvious that the total carbon footprint that the economy is going to produce is actually going to be a reduction. Because even though on the per unit basis, we may actually indeed emit less because the consumption and productions go up, the total amount of emissions that we may be responsible for is actually going to be the other way around. And this has been noted by Jevons in 19th century, when he talked about the coal industry, he talked about the United Kingdom and was talking about how to essentially make coal production more efficient. And he pointed that paradox and call it a carbon question. So in the spirit of Jevons, we want to think of the debate over the decarbonization process as a CO2 question. So as I said, we are going to look at that trade off from the global perspective, and we are going to envision the data from 81 different countries spanning all sectors that essentially constitute economies. We're going to look at a fairly long time period and especially a period where a lot of activities in the decarbonization policies have been present. So we are looking at 2005 to 2020. And there are three questions that we are interested in addressing here. The first one is this notion of innovations, which is what kind of companies innovate in green space. We have observed that companies change the mix in which they innovate, meaning companies originally innovate in brown space, and then out of a sudden they switch to innovating in the green space. The second question is the consequence of that. So the question is, even if we observe green innovation, do we observe that that actually leads to decarbonization, or can we actually see maybe some evidence that is consistent with the Jevons paradox. The final question is more of the welfare question or more general equilibrium question, which is, if there is an innovation that is produced at the firm level, do we observe that this innovation actually potentially benefits other companies, such that we can see that decarbonization is not just a function of who innovate, but who actually benefits from that particular output indirectly. So the data that we are going to look at to inform these questions is the data that comes from Orbis intellectual property and financial. So the broad data set is actually very rich. It has information about innovation activity of both public and private firms, and it also has information about a lot of different fundamentals of these companies. But we are going to match this information with the information on patent data, which of course assumes that companies need to have some innovation activity. And what's interesting about the data we have is that we will be able to trace the ownership of these patents, and also the filing system by which the patent has been actually recognized. And it's important to know that in the patenting kind of framework, patents can be registered with different places. So US patent office Japanese patent office or European patent office are free main kind of places where the patents can be registered. A little digression on that the European patent office is the most strict of all three, in terms of what needs to be recognized as an important innovation in that space. And then we are going to look at this data and contrast it with the data on emissions. So this is the data that comes from S&P global true cost and the data that many people have used in the past including my work and also people at ECB. And that data is going to give us information on frame level emissions, both direct and indirect emissions. And just to give you a couple of summary statistics. In the data we are going to have more than 11,000 global publicly listed companies with financial patent and emission data. Five and a half thousand of these companies roughly speaking are going to have at least one green patent and 2800 are going to have at least one brown patent. The number of patents that these companies jointly produce is actually quite large. We have actually more than a half million patents that jointly are produced by these companies. Here you see a couple of other statistics in the interest of time. I just want to mention that essentially the average patent in activity is pretty rich. It's 755 patents per firm on average and per year is more than 60 patents. So there are companies that actually patent quite a lot. What's important is that this patenting activity by and large is pretty stable over time, although I'm going to show you some pictures that kind of indicate that maybe the recent period that has been a little bit declining in the data. So important for our consideration is the definition of a patent. What constitutes a green patent? What constitutes the brown efficiency patent? We spent a lot of time trying to conclusively characterize these patents. So there are many different classifications in which you can do it. There are four classifications that we have jointly utilized to actually characterize the patents, OECD, IPC green inventory, fossil fuel efficiency improving classes, and the corporate nights clean 200. And broadly, green patents are going to be defined as technologies that may substitute carbon dioxide emitting technologies for carbon free technologies. Brown efficiency patents are technologies that improve essentially the process of producing energy. So you can think of a company that is still polluting, but it's actually polluting with a much lower rate per unit of energy production. I'm going to distinguish between patents from different sources. In my analysis, I'm going to show you results for the European patent office. And as I said, these are probably the most representative results given the stringency of the patenting process in the European area. And what we are going to look at in general is the activity of patenting in both green and brown space relative to the total amount of activity, but we are also going to look at citations of patents, and we're also going to look at the total output of patents. So here are a couple of pictures again to summarize the data. So the top picture shows you what's the average representation of green patents relative to all patents across firms over time. And you can see that this ratio for green patents is pretty stable, and it's roughly speaking seven to eight percent. What you see here is now how the green patents compared to brown patents across different regions. So in the top panel, you see the full sample in the bottom panel, you see the sample that is matched with the emission data from true cost. And what you see is essentially the information which is pretty consistent across different regions, meaning we have increasing the patenting activity in total, which means that companies in general innovate more. But recently there is a little bit of a decline in all jurisdictions in terms of how much patents are being registered with the European office. So let me now tell you how it is that we're going to go around testing the three questions that I have mentioned in the beginning. I said the first question that informs our study is the question of what type of companies are involved in this green versus brown efficiency patenting. Are they actually changing their profile over time? Is there some systematic relationship to any characteristics that predicts where we should expect the innovation to come? And then the subsequent two questions are related to what's the effect of this activity on the first order problem, which is the decarbonization problem. So we are going to look at future emissions relative to the patenting activity today, recognizing the fact that actually it may take time from the time when the company launches the particular technology until the time when actually this is producing a particular output in terms of reduced emission scope. And then we will also look at a couple of different corporate fundamentals to see whether anything changes in the way how these companies operate. On the first question, here is the first look at the data. So what I'm showing you here is essentially two aspects. We are looking at the effect of the size of emission of the company and its age on its propensity to innovate in the green space. So we are looking at these patents that essentially are not producing any fossil fuels. And what you see here are two very interesting facts. Fact number one, that's the red box of this slide, is that younger companies are more likely to innovate in the green space, which to some extent is not super surprising, but it kind of tells you what role actually new technologies and new companies play in this particular framework. So most of the green innovation essentially comes from the entrance, not from the fact that the old companies actually produce more green innovations. The second interesting fact is the observation that actually, if you look at the relationship between the green patenting and the level of firms emissions, and I want you to look at column four, which is the multivariate column. You might find that companies which have higher emissions on average patent more, but it turns out that this is purely an industry fixed effect. Meaning this is just simply a function of the fact that certain industries are actually not patented at all or certain industries don't have any emissions at all. And what it actually suggests is that it's very important to fix the industry and understand how that within industry variation looks like. And if you do that, and we do it in column five, essentially what you find is that companies which are larger polluters are the ones that actually innovate less, which tells you that there is some kind of path dependency going on here. In a sense that if you are a green company, you are more likely to produce green innovation in that space. But what's important about that, and that's related to one of the motivating questions, and this is what we see in column six, that it's not that the company reducing commissions leads to actually producing more patents. It's more of a selection question. In a sense, certain companies are the type of companies that are always going to be green innovators and other companies, those with higher emissions are companies which are not the green innovators. How do we see that if we control for firm specific fixed effects, that effect essentially disappears, which tells you that companies that reduce emissions themselves. They are not suddenly actually producing more green patents at the same time. So we look at the same question from the perspective of brown efficiency patents, and we find exactly the polar kind of evidence to that, which is we find that now the older companies are actually more responsible for the brown efficiency patents. And the companies which have higher emissions are actually the companies which are producing more brown innovation. So this is again, very much consistent with this path dependency story. In some we do not observe switches from someone who was initially a brown efficiency innovator to someone who is a green efficiency innovator. And another way to see it is through this particular table. What we see here is that essentially the stock of patents that has been produced by the companies in the past, either green or brown patents are strong predictors of their patenting activity today. You can see it for both the green and the brown patents. So essentially, if you have been actually involved in the patenting activity in the past of the one type, you are more likely to continue on that path, rather than actually switch your profile. So in other words, if we hope that the economies are going to become more green kind of oriented, the hope is more coming from companies which are young and the companies which have actually been doing this kind of activity over time. So now let me switch to the second question, which is what is the consequence of that. So of course, there is a lot of discussion about should we subsidize patenting activity should be subsidized innovation. And the underlying assumption of that kind of question is, we believe that this activity is going to benefit the decarbonization kind of constraint. And as I told you, there are two ways to think about it. The idea on approaches to say, yes, activity in innovation in green space is going to lead to the larger investment in that particular space and subsequently decarbonization. But alternatively, you can think about the devils paradox and essentially think about the reduction or improvement in technology as essentially being reflected in some other parts of the decarbonization. So there are two examples I want to give you here. One example is Tesla. So we all know that Tesla is extremely good in terms of the green innovation in a sense that it doesn't produce carbon emissions in terms of downstream scope free because the Tesla cars are fully electric cars. But what we sometimes recognize less is that Tesla actually has pretty high upstream scope free emissions, meaning the components that produce Tesla are actually utilizing quite a lot of fossil fuels. And on top of that, when we recharge the Tesla car, it's not obvious where that energy actually comes from. So ideally, we would like to use the renewable energy. But of course, that is source of power does not distinguish where the energy necessarily comes from. As such, you are also responsible for larger scope to emissions. So that's one kind of unintended consequence of promoting Tesla. We essentially are going to shift the production of emissions from one place to another place. And there are interesting studies that suggest that you need to drive quite a lot of Tesla to actually go to the point where the level of emissions in total is going to be less than the standard combustible engine car. The second story is the story of Iceland. So many of you are familiar of course with Iceland. And one thing for which Iceland is actually known is the production of energy from the geothermal sources. So you go to Iceland, you see a lot of that production. What's less known is that essentially that efficiency of energy production has attracted a very large concentration of the aluminum industry in Iceland. So essentially you are offering a free kind of good energy quality, but at the same time you are sparing activity, which is very emission intensive. The aluminum production is actually fairly actually brown in the way how it operates. So essentially both of these issues are manifestations of the Germans paradox that I have mentioned before. And of course, the case of Tesla and the case of Iceland need not to be representative cases as such it's important to study this in more detail. So this is the evidence that I want to show you on that front. What we are looking at here is essentially the impact of innovation in green and brown space on the subsequent emissions one year and three years later. In the top panel, you see what happens one year later. In the bottom panel, you see what happens three years later. And the variables of interest I want you to look at are the total level of emissions. These are the first three columns and this is the log scale, scope one, scope two and scope three. And the next three columns show you the intensity metrics which are essentially emissions scaled by the size of the revenues of these companies. And what's interesting to observe from these panels is essentially that we don't observe any visible reduction in emissions in the future conditional on the company's patenting today. So we don't see that companies actually that innovate more are subsequently polluting less. If anything, we find a little bit of evidence that the scope free emissions go higher. And that's a little bit consistent with the story of Tesla that I have mentioned to you. Of course it is statistically insignificant, but the economic magnitudes that are not small. But if anything, it's very hard to argue for this evidence that this is actually leading to reduction in emissions. If anything, we go to higher emissions rather than lower emissions. And I don't have the results here but if you look five years back, the same kind of picture is painted. So the five year period is not enough for these companies to show any visible decarbonization effect. If you look at the same question from the perspective of brown efficiency, you find even more evidence consistent with the Jevons paradox, especially in the bottom slide, you see the effect on emissions coming from three years before brown efficiency patenting. And you see that as a result of that emissions direct emissions of companies on average, go up, which is exactly what Jevons predicted that companies that become more advanced in the brown technology are going to attract more demand and as such they are going to produce more. So in total, the emissions are going to go up. And this is nicely illustrated if you look at intensity because the measure of intensity actually doesn't have such a high increase relative to the level, which tells you that it must be the case that revenues go up at the same time, which is exactly what the Jevons paradox is. So we look also at this question from the perspective of citations of patents, you could argue that maybe just looking at the stock of patents is not good because patents are different in terms of their quality. And the short answer to that question is, even if we look at well cited patents, it's still the case that those patents don't predict the reduction in carbon production. And it's through the same way for the brown efficiency patents as well. So now we've done a couple of different robustness less in the interest of time I'm going to skip those, but instead I want to move to a couple of explanations of why it is potentially the case that we do not observe this results in the data. So there are a number of ideas that you could put on the table. The first one could be that simply we are in the early stages of this process, and it takes time for the innovation to actually materialize in a kind of real sense. So it might be that we need to innovate more or maybe the process of converting innovation into output, it takes longer than what I have shown you. But remember five year period, it's a pretty long period. So if that is the story, it is a pretty actually negative NPV proposition if we need to wait longer than five years to actually see the benefit of that particular action. The other possibilities that maybe these patents are simply not important enough. Maybe the innovation we observe right now is still not good enough such that it can be launched at a large scale, and it's going to lead to visible improvements in terms of emissions. Of course, it's hard to measure that the citation kind of results was the step in that direction. We didn't find actually evidence of that. The other explanation is, of course, the Germans paradox. So I've already talked about that. Another one is that maybe companies actually are conglomerate companies and essentially R&D activities just a small part of their operations, but the emissions come actually from different sources. So we tried to look at this directly and we saw that even if you look at the standalone companies that don't have this kind of diversified operation, the same type of results qualitatively can be seen. So it's not a story of conglomerate that drives this result. There is a slightly different story behind it. Maybe the story that is kind of the story I want to show you more evidence on is the story that maybe the innovation is not for the company itself, but it's more of a public good in a sense that other companies, other industries can benefit from something that a given innovator produces. So in this regard, we want to look at the story of spillovers of innovation to other companies to other sectors in this particular framework. Let me tell you what we are looking at here. We are going to look at innovation as a kind of clustering process. So we will try to ask the question, to what extent innovation of one firm in an industry spills over to innovation in other firms in the same industry. So the idea essentially is that this is the most direct connection by which one company can benefit from innovation of another company. And we would like to see whether this actually matters. And what's interesting is that you can distinguish between companies that are competitors in our innovation space. So these are other companies that potentially innovate versus companies that are actually there are pure beneficiaries in a sense that they are just consumers of innovation rather than producers of innovation. So here is a couple of results on this particular spectrum. What you see here in this table in the top two panels is that predictability of emissions coming from a green innovation for companies that are also innovators in the same industry. This is what we call patenting firms. And in the bottom two panels, you see the effect of green innovation on companies that are not innovating in that space. So these are the non patenting firms. Throughout all these four panels, you see that essentially none of these measures of emissions that I have introduced leads to a visible reduction. There is a little evidence on the intensity of scope three for the other patenting terms that it gets reduced. But as you can see throughout most of these results, there is not really big evidence that other companies in the same industry are benefiting from the innovation in the green space. So here we look at the same question from the brown patenting brown efficiency. And here the picture is slightly different kind of interesting. What we find is that among the patenting firms. Actually, those firms seem to reduce their emissions conditional on the rivals to actually introduce innovation. So there seems to be some spillover in terms of how this other competitors in the same industry engage in the innovation that is produced by their companies. On the other hand, if you look at the non patenting firms, those which are not competing in this particular framework, you actually find evidence that is consistent with the Germans paradox again, which is the companies that actually are in the same industry are increasing their emissions through this patenting activity, rather than decreasing their emissions, and that's largely coming through the increase sales of this particular companies. So just to conclude, I want us all to realize that the process of climate global warming is clearly an important process to think about. And I really want to upload all the efforts that lots of people are taking these days to actually think about this problem. But I think we also need to realize that the problem is a little bit more complex than sometimes it is presented. So the idea that we can grow to the decarbonization through innovation is potentially useful, but it has to be taken in a more nuanced way. It's not clearly the case based on the observed data that just simply promoting innovation necessarily implies decarbonization. So just channeling resources to green companies to innovate without checking what that innovation does and what's the effect of that innovation on the output in terms of emission is probably not the best way to spend resources of the taxpayers. So there has to be a more nuanced, more concerted effort in the way how we're going to think about subsidizing this green technologies. Maybe another way to think about this is that we need to think about lowering cost of existing technologies. Maybe the idea is not to promote new technologies, but the idea rather is to make the existing technologies cheaper and more accessible for those who could potentially benefit from that. Whichever way we take, I think it's an important and interesting area to think about and I look forward to research coming also from institutions like ECB and other central banks and academic institutions as well. And thank you so much for your attention and I look forward to any comments you may have. Thank you. Okay. Thank you very much, Marcin, for a very insightful keynote speech. Clearly, we will have to study your speech and your research very closely in the coming days and weeks and months. And while we wait for some question from the audience remotely or in presence here, I have a couple of spontaneous remarks. One is, I mean, I came in today thinking that innovation is good and will contribute to the decarbonization process. So clearly we have also to ascertain the behavior of companies and so forth. So my two, three spontaneous comments are, so you showed clearly that young and more established firms innovate the patent and you focus on the case of Europe. Now, about the cross-border dimension. So do companies innovate because this is a public good, contributes to a body of research and so forth, or they increase the war chest of patents in case regulation, norms, carbon pricing sets in. So they are ready to comply to, you know, higher ETS prices and so forth. So this is one dimension. So they innovate and they cool too, but they don't and do firms face also a higher cost. I mean, companies that want to decarbonize, meet fewer carbon greenhouse gases and so forth, they face a cost, they become less competitive. So in that sense, if you can, can you look at conglomerates, companies that whose operation spans over many regions, many continents, and they are faced with different stringencies across these jurisdictions and so are multi-nationals less polluting in Europe, but more, maybe in Far East Asia or North or South America and so forth. That's another possibly interesting question. Now, maybe a different title for you slides could be the dark side of green innovation, perhaps, you know. And so in terms of adoption, so do you have a time series long enough that you can see how long the transmission from the science, the technological, the engineering side, the implementation. So how long does the innovation take to phase in? And then the Tesla question is, I remember reading that somewhere that it takes maybe many years for for an electric car to run before the carbon used in its production is kind of neutralized, you know, somehow. So if you can elaborate on this and we wait for other questions from the from the audience. Fantastic questions. Thank you so much. So I hope I could briefly answer. I tried to take notes and hopefully I took them in a proper way. So on the first question, I think it's a great question about essentially, why are these firms innovating? Are they doing it because they want to benefit the public good? Are they essentially decarbonize the whole economies and the world? Are they doing it more as a hedging motive to hedge against potential regulation? And to, and I think both are possibilities. I fully agree with you. And essentially, our way of thinking about this question was essentially to look at this last part, which are the spillovers. Essentially, if you were expecting that these companies are just doing it for their own kind of selfish reason, you would not observe any kind of effect in terms of the industrial activity, like other companies benefiting from that. Essentially, we don't find the very strong evidence of that to be honest with you. We don't find that the other companies are decarbonizing more, especially when it comes to green patterns. So maybe it is a little bit of the story that you mentioned. It would add to the compliance story a slightly different story, which is essentially the story again that I brought in, which is the story of extracting subsidies. These companies essentially are signaling some kind of type by showing that they're actually innovating, but maybe this is just greenwashing. Essentially, these companies are producing something which is has a particular label, and it's very good to actually extract resources from, but not necessarily something that they actually believe is benefiting that process. And again, it's a little bit of a cynical view, and I don't want to be cynical here because I think that doesn't benefit everyone, but I think the fact that we don't observe the evidence on emission reduction, either at the individual company or at the aggregate sector level is a little bit of a red flag that maybe the type of innovations that we promote. We can think about the scope of subsidies that have been channeled in many regions. It's kind of not bearing the fruit that we would hope to actually observe that these companies are actually doing what we want them to do. And you are absolutely right on this cost story. The story of the cost is quite important and we don't want to deter innovation. We don't want to basically these companies not to have the resources to innovate, but I think that's the kind of why we have the subsidies in the first place. I think they are there because we want to kind of allow these leaders to essentially bypass this competitive pressure channel. So in this regard, public support is helpful, but I think what's important to recognize that it has to be more concerted. The issue of regional variation, that's a great question. So maybe one thing to clarify that maybe has not come out of my talk. When I mentioned that we are looking at European patent office. That's not to imply that we are looking at European companies only in our data set, you observe that global companies registered their patents with the European office. You can have a company in North America, you can have a company in Asia, you can have a company in Europe, and all these free companies registered their patents with European patent office. So essentially in our data, we observe all sorts of companies in different continents. And we did look a little bit at the question of how does it vary across continents. I didn't show you that because I thought I would not have enough time, but essentially the evidence on that is that generally speaking, no matter which region you look at the evidence on the decarbonization is pretty weak. Even in Europe, which typically is considered to be a much more forward looking relative to other kind of domiciles, you don't find much of that evidence that decarbonization is seriously taking place. And again, it could be what you mentioned this is your last point that it takes time to implement. We, the way how we classify here patent is at the time when the patent is actually approved. So that is the process of approval is already controlled for, but of course the adoption of patent is a separate question in reality is very hard to observe when the technologies implemented in terms of the real investment. That's the challenge of the data. This is something that hopefully central banks can help with by encouraging companies to disclose this kind of information, but broadly speaking, this kind of information is not available. But I want to raise that point that I mentioned earlier that even if it takes time, we also need to think a little bit from the perspective of cost versus benefits. And if it takes so long to see the fruit of that, that we need to wait 10, 20 years to see materialization of the technologies, maybe promoting these technologies is simply too costly. And we don't have that time. I think we as a society we know from climate scientists, we cannot wait 20 more years to basically solve the problem. We have much less time to do it. As such, I think time is not our friend here. We actually have a very limited time by which we can solve this problem. So we need to be really kind of thinking that this is going to take faster than more than five years to see actually the evidence of that. Thank you very much, Marcin. We have actually a question or more in the audience. So we'd like the microphone to be passed to the people. Can you please state your name and affiliation? My name is Ben Hartung. I'm working in the Market Operations Directorate here in the ECB and I have actually two questions. The one is a bit out of curiosity. I found it interesting that essentially you say that it's mostly firm fixed effects if you're identifying who's innovating in the green space. And I wonder whether that's specific to green innovation because there's also evidence that on general, like most of the innovation is coming from new firms. So I wonder whether you can see whether this is beyond what we see on average for innovation. So whether there's a particular concern for green innovation. And the second question is on, let's say, your case or your narrative that innovation doesn't help that much. My understanding is also that essentially it needs to be complemented by abiding tax on carbon, whether it's through a cap and trades system or a tax. So I wonder how you see that because ultimately, I mean, it is not so surprising that if you don't have a tax on carbon that at least part of the innovation windfall is used for simply more consumption. So I wonder how you see the conjunction between the carbon pricing and the innovation. Thanks a lot. Yes. Thank you so much. And these are great comments. And on the first point, I think you are right that in some sense what we observe is that a little bit of this dichotomy, which is a green companies are typically younger companies. And that essentially promoting entry of new companies into the space is essentially going in the direction of promoting green innovation. That's kind of evidence. What's interesting about that is that it's really a selection process. It's not the fact that companies change themselves. So essentially it's almost like your type is fixed ex ante rather than you over time realize that you should be switching from one technology type to another technology type. So to us, this was a very interesting finding. We didn't expect that we thought that in the way how the pressure is going to be applied on companies. They will have incentives to essentially change their type from being brown to being green. But what we observe is that essentially that either that adjustment cost is very high or the incentives are not strong enough to for the companies to do it. And I agree with you that looking at that question in more detail is definitely a very promising area to understand the problem. Right now we are highlighting the problem. And of course we will do everything to understand the problem even better. On the second question. I mean, you are talking to a person who has exactly your view. I mean, maybe not exactly in terms of implementation, but I've done quite a bit of work on exactly kind of the question of what are the ways in which we should be thinking about to address the problem. And the way in which I have conducted my research mostly with Patrick but also with others was to think as essentially of what you call a carbon tax, but implemented from the perspective of the private sector. So thinking of essentially cost of capital channel as a potential channel in which companies are going to be incentivized to decarbonize. So of course, the different ways in which you can apply this tax it can be applied by states it can be applied by the markets, but I agree that the price kind of mechanism is a potentially useful thing. However, some of the evidence that we observe is that it may not be enough. So now the question is, is the failure of the problem, because there is some leakage like say you go to other non regulated jurisdictions, or maybe you have diversified operations and that's what helps you kind of pass the cost somewhere else. Or is it because the cost is too small. I think we kind of had a little bit of that test recently, where the ETS market has actually gone to higher prices and we have seen that that kind of potentially has told some of their brown activities. But I think it is a question how high that cost should be and are we applying enough of that cost. An alternative of way of thinking about it is that maybe rather than thinking of the price based system we should think of the quantity based system. So essentially, as I said with the price based system the problem is that that you can always shift the business into something which is basically less cost intensive. I have a conglomerate company. If I have two units one of them pollutes but it's profitable the other one doesn't polluted that is less profitable. If I impose the tax on the company as a whole. The company has an incentive to shift actually to the brown technology, because that's essentially where the profit margin is higher. So they are going to resize itself in a way that is going to offset the cost that is basically born on that activity. So this is a little bit of the leakage within the company boundaries. So so I think the cap and trade system that we have as a quantity system is potentially better because it directly gets a quantity of a mission rather than indirectly through the price mechanism. And my conclusion to all of this is that I think what we really need as a society is a mixed approach, which is I don't think we have one particular tool that is going to solve all the problems. One of the failure of the environmental economics as I can see it is that we put so much faith on this carbon tax idea that that essentially led to inaction rather than action. The coordination costs were so high that we did not implement the solution in a in any sensible way. And we pay the price because time is a risk factor for us here. And rather than trying to finance the best possible solution, to me, the more kind of balanced approach where you engage many players at the same time and many tools at the same time, at least benefits that problem directly, maybe more costly solution. But I think if you think of lexicographic preferences and the idea that we want to solve the climate problem, that may be a more productive solution. Thank you, Marcin. There is another question, Jean David. Hello, I'm Jean David Tigu with the CV Great Talk. Marcin, thank you very much. I have a question on the German paradox, which I didn't know before this talk, and I find it fascinating. So I, the way you presented the paradox is it's crucial for the paradox to be there that the firm is sharing with the consumer the benefits of innovation. Okay, imagine a monopoly firm that doesn't share anything, innovates, but just keep all the profits. There in that case, I would think that the paradox is not there anymore or is attenuated. So could it be that if the paradox is very prevalent in the economy, could it be that monopoly firms or monopolistic firms would actually be the would lead to less of a paradox and therefore a more more carbonization than competitive environments or competitive industries. And my question would be, could it be used to test the prevalence of the paradox? Have you thought about this? Thank you. I think this is a great question. I think we fought a little bit about that. And I think this question of what the industrial organization is, it's a very important question. And we didn't do much in this paper, but I think overall I think it's a very important question. On the issue with it attenuate the German's paradox is possible, but I don't think I would put a limit case like the way you presented it in a sense that think of a company like Apple. Apple produces a phone, right, which we know is getting better and better the battery lasts longer. This is kind of what we consider the kind of efficiency gain, essentially. And we observe that this Apple phones are basically demanded more and more. So yes, we know that the gross of the profits goes to Apple because essentially Apple has become close to the monopoly in this kind of space. So, so, but at the same time, I don't think the society is actually uncomfortable with that particular proposition. We are all kind of comfortable with giving up with this profit share and essentially still consume the product we are paying the price to essentially subsidize the company called Apple. So, so I agree with you that that margin matters. And of course the price mechanism controls that. But at some level, there is also some kind of elasticity aspect of that, how much you are sensitive to your price. And how far can you push that. So in this regard, I think this is where we need to think as a two dimensional problem a little bit rather than just one dimensional problem. So it's a great idea to think about the industry structure more broadly as a factor in this particular decarbonization efforts. Absolutely. Okay, thank you. Again, so you are steering a lot of interest in in more areas of this, this field. I think one, two debates on which probably your findings. Your keynote speech, your, your research will have an impact is the debate on market neutrality market efficiency. It was launched by Scholmacher in 2018 2019 is posted on the fact that the system will be market neutral buys has a higher share in portfolio of high carbon companies and that we should sort of tilt our portfolios toward the greener firms and so on. So in a way you are taking some urgency some wind out of that debate. And then there is a especially one BCB board member is very keen about a green capital market union. So your evidence today, where does it leave us in terms of okay pursuing market efficiency and pushing for a green capital market union. Yeah, I think this are great comments and I am aware of the research that's one of your ECB workers Melina Papuzzi has done with Monica Piazzese and Martin Schneider on the neutrality. Fascinating research and I agree that this idea of neutrality in the context of climate debate is is an important one. I think in general I on that first point, I definitely believe that we should promote companies that actually are more advanced in the decarbonization process. And we have such companies. So essentially what I think I'm trying to tell you is that there are different ways in which we think we can go to the gets to decarbonization. And many people think that technology is the one that is the leading one. And it doesn't seem to be the case that maybe this is what's happening. So, so that's kind of the view that I'm having. There could be other ways in which companies decarbonize. And the output is what matters of course at the end of the day, but for policy makers, it's important of where it is that we are going to provide the stimulus where it is that we are going to provide incentives. And I think that's kind of how I would like to view my research in the first kind of aspect of your question. In terms of the Green Union, I fully agree with you on that. And for one simple reason, in my response to the earlier question about the decarbon tax, I certainly believe that part of the failure that we have in this space is the coordination failure. So essentially if we can think of coordinating action, like how it is that we can get more of the players engaged around this particular problem, there will be less evidence of some kind of leakage that kind of destroys the effort of their leaders and benefits the actually laggards. So this is what we don't want to observe. We don't want this problem to be pushed forward. And here, all these multinationals that can transfer their emissions abroad, we don't want that to become basically a solution to the carbon problem because the carbon problem is not a one country's problem. It's a problem of the global world. As such, it doesn't matter where these emissions are actually produced. It matters that they are produced. Before we tighten the structure in a way that it's harder to actually get around this problem, the more success I anticipate we are going to observe in solving this problem. So any efforts that go in that direction, I fully agree with you are the efforts that are going to be actually beneficial. Okay, please join me in a round of applause for Marcin. Thank you so much. Okay. Thank you. Thank you very much. Marcin, hope to see you again soon. Thank you so much. We are taking now the lunch break for one hour. So please reconvene here in about an hour. Yeah, so thank you very much.