We investigate the impact of patent policies and emission taxes on green innovation, allowing for strategic interaction of firms. We find that the greater the proportion of green-conscious consumers, the less likely firms are to license green innovation, which results in higher emissions levels, unless the emission tax is increased beyond a certain threshold. At the same time, there exists a second threshold level of the tax beyond which increasing the emission tax leads to increasing the emission level. This paradox can be mitigated by decreasing patenting costs and/or making the patentability requirement stricter.