Social and private outcomes of green innovation incentives in European advancing economies

Abstract

A question of particular importance in environmental policy is how to deliver eco-innovations with both private and social benefits. The question is even more important in emerging economies where pollution-intensive industries prevail and policies often favour growth over ecological concerns. This paper explores how four public incentives (regulation, taxes, subsidies and procurement of eco-innovations) and two private incentives (demand incentives and reputational concerns) contribute to the creation of private and social benefits from green (eco) innovations in emerging Central European economies. All six types of incentives have positive effects on the introduction of environmental innovations. Firms introduce innovations with benefits for end users only if they are accompanied by private benefits. The combination of regulation, procurement and financial incentives together with private incentives increase the likelihood of the introduction of environmental innovations with social benefits. This paper provides evidence-based recommendations for the management of environmental policies.