Policy for environmental innovation: a comparative review of empirical evidence from two sectors

• Since the 1960s, governments have sought to encourage technological development to reduce pollution. These efforts now include global greenhouse emissions, especially in sectors such as transport and energy generation. A variety of means are applied: general taxes and trading systems, subsidies and technology-forcing standards. At the macro-level, economists argue that general economic instruments are a more efficient way to regulate emissions than administrative or technology-specific measures. The effectiveness of general economic instruments needs to be examined in relation to their innovation impact in different (sub-) sectors, however. This paper builds on research in the automotive and energy sectors to compare general and specific, economic and administrative, means in terms of their impact on different types of innovation. The review shows that the effectiveness of policy instruments is conditioned by the type of innovation needed (incremental, modular, architectural or radical) and the responding industrial context. General instruments – economic and administrative – encourage development and diffusion of incremental and modular innovation, whereas technology-specific instruments are needed to support the development and diffusion of architectural and radical low-carbon innovations. However, in order to have an effect, instruments have to be connected to a responding industrial context, i.e. networks of firms with requisite resources and capabilities to deploy. Key challenges for policy makers when choosing instruments include issues of selection, stringency, scale and stability.

Keyword

Environmental policy

innovation

energy

automotive

Publication and Content Type

vet (subject category)

kon (subject category)