The objective of the paper is to lay out the state of knowledge on the role of innovation and the diffusion of technologies in the greening of global value chains as well as some of the main policy issues and key research gaps1. A special emphasis will be put on developing countries in which innovation, skills and technological absorptive capacities tend to be lower while green technologies are urgently needed. The structure of the paper is extremely simple. In a first part, we give some concepts and definitions on technology, innovation, and the channels of technology diffusion. In a second part, we use various statistics (green patents, trade flows, and foreign direct investments) and illustrative examples to describe how technology and knowledge is created today and disseminated across countries. For data reasons, we mostly focus on climate-mitigation technologies, but there are good reasons to think that other green technologies do not significantly differ from the “average” climate mitigation technology. Then, we list and discuss key policy challenges (the role of environmental policies, intellectual property rights, capacity building, etc.). The conclusion summarizes the main lessons.
