Working Paper: NBER ID: w25631
Authors: David Popp
Abstract: Innovation is an important part of environmental policy, and encouraging innovation is often an explicit goal of policymakers. A large literature in environmental economics examines the links between environmental policy and innovation. Popp et al. (2010) provides an extensive review of the literature on environmental innovation. This paper updates that review, highlighting research published during the past decade, with a focus on empirical research examining links between environmental policy and environmentally friendly 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: Environmental Policy; Innovation; Government R&D; Green Technologies
JEL Codes: O31; O38; Q55
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Regulatory pressures (G18) | Innovation (O35) |
| Higher anticipated environmental regulations (Q52) | Increased innovation (O35) |
| Demand-pull policies (E65) | Innovation (O35) |
| Government R&D spending (O38) | Increased patenting activity (O39) |
| Environmental policies (Q58) | Innovation outcomes (O36) |