This paper analyzes the market valuation of climate innovations through a detailed
examination of patent data. We explore the relationship between Tobin's Q
—a measure of firm valuation— and the stock of patents across various climate technology
categories. Our findings indicate that, generally, investors do not value climate
innovations. However, our exploratory analysis reveals two notable exceptions. First,
patents related to improving the efficiency of carbon-intensive technologies (carbon
intensive climate innovation) show a positive correlation with firm valuation. Second,
a select group of patents in non-carbon-intensive climate technologies, which
contribute to both adaptation and mitigation efforts, are also positively valued. Our
results suggest that a one standard deviation increase in the stock of patents relative
to R&D expenses, measuring firms' research efficiency in these climate innovation
categories, is associated with an increase between 0.5 % and 1.5 % in Tobin's Q.