The innovation effects of environmental policy instruments — A typical case of the blind men and the elephant?

In this paper we examine the innovation effects of environmental policy instruments in four literatures: theoretical models on incentives for eco-innovation, econometric studies based on observed data, survey analysis based on stated information and technology case studies. The aim of this paper is to critically examine the methods and the results. We argue that the case studies literature, even when its results are specific and difficult to generalise, is a necessary source of empirical evidence about policy impacts and the factors responsible for these impacts, pointing to issues that are neglected in the theoretical and econometric literature such as the specifics of the innovation context and policy interaction effects. The paper states five synthesised findings and makes a plea for multi-method analysis. One other important synthesised finding is that the influence of market-based instruments on innovation (such as emission trading and taxes) is far weaker than assumed.