Environmental Policy and Innovation: A Decade of Research

Abstract

Encouraging innovation is an important part of environmental policy. A large literature in environmental economics examines the links between environmental policy and innovation. This paper reviews recent literature on green innovation. I highlight major trends in the literature, including an increased number of cross-country studies and a focus on the effect of different policy instruments on innovation. I include a discussion of the justifications and evidence for technology-specific policy incentives and present evidence on the effectiveness of government R&D spending. My review concludes with a discussion of three promising areas for new research on environmental innovation.

Keywords: green innovation, induced innovation, pollution, climate change, renewable energy, energy efficiency, research and development, technology policy

JEL Classification: O310, O380, Q550