By Aliénor Cameron, Sylvain Belrose and Marc Baudry.
On 29 January 2025, the European Commission unveiled the Competitiveness Compass, a set of policy guidelines that highlights the need to align industrial decarbonization and long-term competitiveness. While existing literature recognizes the importance of innovation to develop or scale up low-carbon technologies, the link between firm-level green inventions and their real-world impacts on technological change, efficiency and emission levels has largely been overlooked. This paper investigates this relationship in the context of heavy industry firms regulated by the European Union Emissions Trading System from 2013 to 2020. In a first stage, efficiency and technological progress are assessed using a Technological Frontier Analysis, applied to emissions data from the EU Transaction Log and financial and operational data from ORBIS. In a second stage, a firm-level panel econometric model evaluates the effects of green patenting—measured using PATSTAT data—on firms’ efficiency and technological progress. The results reveal a paradox: firms engaging in green patenting are, on average, less likely to contribute to technological change in their sector than non-green-patenting firms. This suggests that carbon-intensive technological lock-in may constrain the transformative impact of green innovation, allowing firms using conventional technologies to achieve greater performance gains from their innovative activities.