This report examines the impact of public innovation subsidies and the EU Emission Trading Scheme (EU ETS) on green innovation in Swedish industrial firms.

Analyzing green patents from 1985-2018 and firm-level data, our findings indicate that substantial innovation subsidies significantly boost green patenting in the manufacturing sector, while smaller subsidies have little effect. ETS firms produce fewer, narrower, and less cited green patents than non-ETS firms, indicating a focus on compliance over broader innovation. No significant combined effects of subsidies and emissions trading were observed, highlighting the importance of targeted subsidies in promoting green technology.