Innovation and Pollution Control

Abstract

Environmental resources and human knowledge are the ultimate foundations on which human welfare is based. The impact of technical knowledge is well researched. Denison, for example, attributes no less than 47 per cent of the growth of real GNP in the USA over the period 1948–81 to technical change. The importance of the environmental resource base has been brought to the foreground by studies like Limits to Growth. Nowadays environmental policies are applied in most industrialised countries just to prevent further deterioration of the environment. In these countries it is not the physical environmental constraint that is felt, but perhaps the drag on economic growth exercised by the costs of environmental regulation. Whatever the nature of the environmental limit to economic growth may be, physical or juridical, it can be overcome by the use and extension of knowledge in order to reduce the amount of pollution and the costs of pollution control. Technical advance or innovation in pollution control is and will remain a very important factor affecting the success of the efforts that are made to improve environmental quality and to maintain growth of output. In this article we shall give a survey of the economic research in the area of innovation and pollution control. The main research themes will be indicated, “blank spots” pointed out and suggestions made about possible subjects for fruitful future research. In section I a short introduction is given to the general economic approach to technical change and innovation. In section II the existing economic literature on pollution control and innovation is reviewed. It will be argued that some of the most relevant research themes have not been taken up. These issues will be discussed in sections III and IV. Section V contains conclusions and recommendations for future research.