Which policy instruments to induce clean innovating?

Abstract

In view of the sizeable climate change challenge, we need a clean innovation machine operating at full speed. Beyond the supply of public clean R&D infrastructure and clean public procurement, the development and adoption of new clean technologies by the private sector needs to be assured to reduce Green House Gas (GHG) emissions. The private clean innovation machine, left on its own, is not up to this challenge. It needs government intervention to address the combination of environmental and knowledge externalities and overcome path dependencies. The firm level evidence presented in this contribution on the motives of private sector firms for introducing clean innovations from the latest Flemish CIS eco-innovation survey confirms that firms are responsive to eco-policy demand interventions. At the same time, the high importance of demand pull from customers and voluntary codes of conduct or voluntary sector agreements as drivers for introducing clean innovations, is a reminder of the internal strength of the private innovation machine, which governments need to leverage. Policy interventions are shown to be more powerful to induce the adoption and development of new clean technologies when designed in policy mix and time consistently, affecting future expectations.