Policy-induced environmental technology and innovation: a retrospective

The debate on the relationship between environmental protection and competitiveness has become one of the defining economic policy discussions in Europe and beyond. Critics argue that stricter environmental standards inevitably raise production costs and reduce profitability, with consequences for maintaining competitiveness. Supporters of ambitious climate goals and environmental policy, by contrast, argue that regulation and taxes can stimulate and redirect innovation, improve resource efficiency, and create new markets for clean technologies. In our 2015 study titled ‘Policy-induced environmental technology and inventive efforts: is there a crowding out?’, we aimed to contribute empirical evidence to this discussion by examining under what conditions potential trade-offs between compliance and innovation efforts arise, which types of firms they affect the most, and what policy can do to mitigate potential side-effects. A decade later, the topic is still high on the agenda of academics and policymakers. In this retrospective, we briefly present our initial findings, analyse how the literature has developed since then, and what newer data can tell us. Finally, we discuss implications and routes for future research.