(In search of) The green premium: transaction level evidence of the sustainability advantage

The green transition is reshaping global markets, but whether environmentally sustainable products translate into competitive advantage remains an open question. This paper investigates the existence of a green premium in international trade and identifies the mechanisms through which firms can successfully capture value from environmental sustainability.

Moving beyond aggregate analyses, it provides micro-level evidence on how green products and green innovation perform in export markets.

The analysis combines highly disaggregated Italian customs data with detailed patent information for the period 2005–2019. Export transactions are observed at the firm–product–destination level and linked probabilistically to patents using established concordances between technological and product classifications. Green products and green patents are identified independently using internationally recognised OECD, WTO, APEC, and WIPO taxonomies. This approach allows the authors to isolate price, quantity, and revenue effects while controlling for firm characteristics, product attributes, destination-market conditions, and exchange-rate shocks.

The results reveal a nuanced picture of green competitiveness. Green products without patent protection command higher unit prices but suffer from lower export quantities, leading to reduced overall export values. These products also exhibit greater exchange-rate pass-through, behaving like high-cost goods with limited pricing flexibility. In contrast, green products supported by patent protection outperform significantly: they are exported in larger quantities and generate higher total revenues. Patent protection enables firms to shift greenness from a pure price premium to a scale-based competitive advantage.

By identifying innovation as the missing microfoundation in the green premium debate, the paper clarifies how firms can overcome the potential cost disadvantages associated with environmental sustainability. The findings carry important implications for environmental and innovation policy, suggesting that fostering protectable green innovation is essential for aligning environmental objectives with export performance and long-term economic viability. Readers are invited to explore the full paper for detailed empirical evidence and policy insights.

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About the authors
Laura Bisio is senior researcher at ISTAT (Italian National Institute of Statistics). She works within the Quarterly National Accounts Unit, where she currently leads the estimate of labour input and labour cost. Her research spans firm-level innovation, labour market dynamics, and wage structures, and she actively coordinates research projects in these domains. Her latest works have been published on International Journal of Manpower and European Economic Review, among others. 

Angelo Cuzzola is a postdoctoral researcher at the Institute of Economics of the Sant’Anna School of 
Advanced Studies and a research fellow at the European Central Bank in the Stress Test Experts Division. 
His research lies at the intersection of innovation, international trade, and financial stability, using large-
scale microdata to study how technological adoption and regulation shape firm performance and market dynamics. 

Marco Grazzi is a Full Professor of Economic Policy at the Catholic University of the Sacred Heart in Milan. His research focuses on the role of firms in shaping industry and country-level dynamics. In this regard, his work covers a number of fields, including international trade and the relationship between firm growth and innovation. Currently, he is focusing on the impact of the latest wave of innovations, such as robots, AI and digital technologies, on firm and employment dynamics.

Daniele Moschella is Associate Professor of Economics at the Scuola Superiore Sant’Anna (Pisa, Italy). His research focuses on the intersection of technological change and firm performance, examining questions such as how automation affects employment and wages, how innovation capabilities enable firms to compete on international markets, and what drives firm growth.

Views and opinions expressed are however those of the author(s) only and do not necessarily reflect those of the European Union or the European Education and Culture Executive Agency (EACEA). Neither the European Union nor EACEA can be held responsible for them.