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This article discusses the role that innovation plays in the transition to a green economy, with special attention paid to the importance of diffusion and transfer of technologies. The article first describes the origins and conceptual foundations of a transition to a green economy, concentrating on the initiative launched by the United Nations Environment Programme, and leading to the United Nations Conference on Sustainable Development in Rio de Janeiro in June 2012 (Rio+20). The article then reviews the critical role of innovation in the reconfiguration of the economy's capital stock, leading to a discussion of the roles of both innovation and environmental policy in promoting such technological change. It next discusses the channels for international transfer of technologies and their relationship to the international policy architecture, and proposes that international discussions concerning technology transfer, particularly those related to environmental technologies, have suffered from a lack of coherence in policy positions, based probably on a fundamental misunderstanding of the economic nature of these processes.