Who is at the forefront of the green technology frontier?
Photography of a glass building with tree reflections (Image: Scott Webb via Pexels).

Who is at the forefront of the green technology frontier?

The manufacturing sector emerges as the dominant force in driving the green technological revolution.

By Alejandro Lavopa and María de las Mercedes Menéndez

The development of green technologies is a precondition for effectively addressing climate change. Green technological change has accelerated in the last decade, signalling a new technological revolution around the green economy, but: who is driving this incipient revolution? Data shows that private sector firms in the manufacturing sector account for the lion’s share of green patents at the global level. This finding underscores the crucial role industrial development plays, not only in accelerating economic growth and job creation, but also in fighting the most pressing challenge of our times: climate change.

The rise of green technologies and the role of industry

The world is on the verge of a climate catastrophe. Meeting the goals of the Paris Agreement, which aim to reduce global warming by 2050 to below 2 degrees Celsius above pre-industrial levels, is one of the key challenges of the twenty-first century. Addressing this challenge requires not only a radical change in our consumption patterns but also of our production systems1 – a shift that can only take place if we develop new “green” technologies that aim to protect the environment and reduce the impact of human activities.

Green technologies – especially those associated with renewable energy – started taking off at the beginning of this century. This can be seen in the steady rise in the number of green patents since 2000 (see next figure). Such patents increased 20-fold in the last 20 years, growing from around 50,000 to over 1 million by 2020.

Global cumulative number of green technologies, 2000–2022

Source: Authors’ elaboration based on PATSTAT (Autumn 2022 edition). Green patents are defined as those tagged with the specific code Y02, assigned by the European Patent Office (EPO).

Who is driving this growth? Combining data from two globally recognized sources, we identify the main engine of the green revolution: private sector companies operating in manufacturing industries (see figure below).

First, in terms of institutional actors, the majority of patents are held by private sector companies. According to PATSTAT data, private firms held over two-thirds of all green technology patents submitted between 2000 and 2022. This was followed (at a considerable distance) by individuals, who held 14% of all green patents, while universities ranked third at 9%. Collaborations between companies and other institutional actors – such as universities, governments and non-profit organizations – represented less than 1% of all green patent applications

Green patents by institutional actor and productive sector in 2022

Source: Authors’ elaboration based on PATSTAT (Autumn 2022 edition) and ORBIS-IP.

Second, the vast majority of private sector companies that hold green patents operate in the manufacturing sector. Unfortunately, the patent offices’ data sets do not record specific subsectors, but the Bureau van Dijk (BvD) ORBIS-IP2 data set provides additional information on green patenting firms, including on the subsector in which they operate. Accordingly, 57% of green patents from private sector companies were held by manufacturing firms by 2022. Green innovation activity was second highest in business services, which held 26% of green patents, followed by trade (5%). Other subsectors held negligible shares in total green patenting. The manufacturing industry clearly leads the green technology race among the various economic subsectors.

The special significance of manufacturing in driving green innovation becomes clearer when we consider proportionality (see next figure). For example, the share of green patents held by the business services sector (26%) is almost equal to its share in the total population (23%) of firms in the ORBIS-IP data set. Compare that with manufacturing firms, which hold 57% of all green patents but constitute only 10% of the total population of firms. This disproportionate participation in green innovation underscores the manufacturing industry’s potential to drive technological change.

Sectoral shares in green patenting and total companies

Source: Authors’ elaboration based on ORBIS-IP

This finding highlights an important aspect of industry in driving sustainable development, which is often overlooked. Besides being the main engine of economic growth and productive job creation, the industrial sector is also the prime hub of global innovation and the leading engine of green technology creation. Once the source of the problem, industry is becoming a key contributor to the solution to climate change.

A new global divide

One notable characteristic of the global green technology landscape is its significant concentration. When examining the geographical distribution of companies currently holding green patents, we find that 85% of industrial companies involved in green patent activity are concentrated in only five countries (see next figure). Japan’s manufacturing firms occupy a leading position in this field with 32% of patents, followed by China (19%) and the USA (18%). The remaining top-10 countries are all high-income industrial economies. Industrial firms from developing countries (excluding China) collectively hold less than 2% of green patents.

Top-10 green patenting shares by country of current owners, manufacturing firms, 2022

Source: Authors’ elaboration based on ORBIS-IP.

This finding is concerning. Climate change is a global phenomenon and can only be tackled at the global level. All countries should be ready to participate in the new technological revolution, possessing sufficient capabilities to develop and adapt green technologies to their own contexts, needs and circumstances – not just to absorb them.

Distribution of green patenting shares by country groups, manufacturing firms, 2022

Source: Authors’ elaboration based on ORBIS-IP.

Addressing climate change requires urgent efforts to enhance developing countries’ green industrial innovation capabilities. This entails building a domestic knowledge base, including skills, expertise and institutions to fully exploit their potential. Without the necessary industrial and innovation capabilities in developing countries, the concentrated patent landscape depicted in the figure above will not change. This will make it more difficult to amass global efforts to address climate change. Developing countries should therefore take a leading role in the race towards sustainable development – for this to become a reality, they must implement SDG-driven, mission-oriented and innovative industrial policies.3

  • Alejandro Lavopa is Research and Industrial Policy Officer at the Industrial Policy Research Unit (IPR) of the United Nations Industrial Development Organization (UNIDO).
  • María de las Mercedes Menéndez is PhD fellow in Innovation, Governance and Sustainable Development (IEGSD) at United Nations University- Maastricht Economic and Social Research Institute on Innovation and Technology.

Disclaimer: The views expressed in this article are those of the authors based on their experience and on prior research and do not necessarily reflect the views of UNIDO (read more).

Read next