Towards a Theory and Policy of Eco-Innovation - Neoclassical and (Co-)Evolutionary Perspectives

Innovation processes toward sustainable development (eco-innovations) have received increasing attention during the past years. Since existing theoretical and methodological frameworks do not address these problems adequately, research need can be identified to improve our understanding of innovation processes toward sustainability in their different dimensions, complex feedback mechanisms and interrelations. This paper discusses the potential contribution of neoclassical and (co-)evolutionary approaches from environmental and innovation economics to fill this gap. It is argued that both approaches have their merits and limits concerning a theory and policy of ecoinnovation. Neoclassical methods are most elaborated to analyze the efficiency of incentive systems which seems to be essential for stimulating innovation. Evolutionary approaches are more appropriate for analyzing long-term technological regime shifts. On this theoretical basis, a crucial question is if innovations toward sustainability can be treated like normal innovations or if a specific theory and policy are needed. Three specialties of eco-innovation are identified: the double externality problem, the regulatory push/pull effect and the increasing importance of social and institutional innovation. While the first two of them are widely ignored in innovation economics, the third is at least not elaborated appropriately. The consideration of these specialties may help to overcome market failure by establishing a specific eco-innovation policy and to avoid a "technology bias" by a broader understanding of innovation. Eco-innovation policy requires close coordination with environmental policy in all innovation phases. Environmental and eco-innovation policy can be regarded as complementarily. However, an environmental policy neglecting the potentially beneficial effects of a specific eco-innovation policy (especially in the invention phase) may lead to excessive economic costs. Due to the specialties of eco-innovation, it seems moreover to be crucial to strengthen the importance of social and institutional innovation in both eco-innovation theory and policy. --eco-innovation,innovation theory,co-evolution,double externality,regulatory push/pull effect,social innovation,institutional innovation

Theoretical and Empirical Evidence of Timing-to-Market and Lead Market Strategies for Successful Environmental Innovation

In environmental policy first mover advantages for environmental technologies are often taken for granted. It is a popular view to see the state as a political entrepreneur who introduces a certain environmental policy instrument, e.g. feedin tariffs for renewable energies, and thus becomes the world market leader or the lead market for the respective technology. Against this background, this paper wants to find out if the idea of first mover advantages can be justified by theories and empirical evidence from industrial organization and business management studies. After a review of theoretical and empirical papers we see that first mover advantages are not confirmed by empirical evidence. Thereby the successful innovator is not necessarily the first but very often one of the early movers within the competition of different innovation designs. We show that the success of a timing strategy depends on country-specific lead market potentials, on market and technology characteristics and on the regime of the country-specific regulation. On this basis we derive options for environmental innovation strategies for firms under different circumstances of markets, technologies and regulations. We will see different implications for practical innovation management and innovation policy.Lead markets, environmental innovation, first mover advantages,innovation strategies

Employment impacts of cleaner production: evidence from a German study using case studies and surveys

The study assesses net employment effects of technical progress which can be expected by the ongoing transition from end-of-pipe technologies towards cleaner production. Empirical evidence is presented on the basis of case studies and panel data including a telephone survey in German industry. The main result ist that cleaner production leads in more firms to a net creation of jobs than end-of-pipe technologies. However, eco-innovations like other innovations tend to require higher qualification. Thus, the demand for skilled and high-skilled labour rises while the demand for unskilled labour decreases. The results imply that supporting cleaner production is not in conflict with labour market policy. Synergies are identified, they are however small and specific. Thus, technology policy in general and supporting cleaner production in particular can not be expected to give substantial contributions to the solution of mass unemployment in Germany without using additional instruments (e.g. concerning a reduction of labour costs, increasing flexibility of labour markets). --

Increasing energy and resource efficiency through innovation: an explorative analysis using innovation survey data

Energy and resource efficiency innovations (EREIs) are often seen as win-win opportunities for both the economic and the environmental performance of firms. It is thus worth asking how the innovation activities and performance of firms with regard to energy and resource efficiency look like: Do EREI firms follow distinct innovation strategies? Do EREIs spur or limit innovation success? And what are the particular features of EREI firms compared to conventional innovators? Using German innovation data, we find that EREIs are determined by a larger set of technology-push and market-pull factors. On the supply side, R&D budgets, research infrastructure and networking with other firms are important factors of influence, while on the demand side increased productivity and cost reductions are decisive, as well as improved product quality. On the other hand, EREIs are complex activities which also need regulatory incentives. Although EREIs are not more successful compared to conventional innovations, they contribute substantially to the economic success of firms. --Resource efficiency,energy efficiency,environmental innovations,innovation surveys

A Lead Market Approach Towards the Emergence and Diffusion of Coal-fired Power Plant Technology

Today, more than 70% of the world?s total electricity production is supplied by power plants using conventional fossil fuels. Coal accounts for more than half of the fossil fuel combustion in electricity plants. Future mega trends give reason to believe that electricity demand will double until 2030. The abundance of coal reserves in many countries and increasing fuel prices for gas and oil against the background of a growing need to provide sufficient, secure and affordable energy make coal an attractive option in worldwide electricity production. Against this background, the aim of this paper is to analyse why clean coal technologies in some countries diffuse faster and to a greater extent than in other nations. The paper applies the lead market concept. Lead markets are markets that adopt an innovation before it is adopted by most other countries and therefore lead the global diffusion of the innovation. The most important technological trajectory for coal power plants is the pulverised coal-fired steam cycle (PC) which is the basis for all other coal combustion technologies. Modern PC technology is well developed and accounts for over 90% of coal-fired capacity worldwide. Therefore it will be taken as a reference technology, with SC (Supercritical) coal-fired power generation technologies being selected as an innovative technology within this trajectory. As for the diffusion of SC, the paper concentrates on Germany, USA, China and Japan. The analysis shows that the typical lead market pattern applies only to a limited extent. In the 1960s and 1970s, the USA has established a lead market for SC technology. In the meanwhile, Japan has surpassed the United States, although it started out as typical lag market. After analysing the technology diffusion in the four countries, one central question evolves: Can we determine a lead market for coal-fired power plant technology today? The discussion of lead market factors shows that currently no clear lead market exists for coal-fired power plant technology. Although the United States still has comparative advantages in terms of prices, demand and market structure, Japan has caught up in terms of transfer advantage and Germany in terms of regulation. In the near future, demand advantages will switch to China. This supports also the hypothesis that - apart from the demand-oriented lead market model - push factors such as R&D activity play a strong role as well. The transfer advantage of Japan stems mainly from its intensive R&D activities. Thus it can be concluded that a mix of push and pull policies is necessary in order to establish a lead market position. --Lead Markets,Coal Power plants,Energy Technology,Energy Policy

Determinants of Environmental Innovations in Germany: Do Organizational Measures Matter? A Discrete Choice Analysis at the Firm Level

Based on a unique firm level data set of the German manufacturing sector, this paper provides new empirical evidence regarding the determinants of different types of environmental technological innovations. We examine particularly the effects of environmental organizational measures such as certified environmental management systems. The econometric analysis is based on binary and multinomial discrete choice models. The latter are considered because they allow for the examination of the determinants of specific types of environmental innovations compared with the absence of such innovations as basic alternative. The most important result is that single measures such as product design with life cycle analysis and take back systems for products have a significantly strong positive effect on environmental product and process innovations. In contrast, the effects of certified environmental management systems are statistically less reliable. While the world-wide ISO 14001 standard has a significantly weak positive influence, the European EMAS standard has no significant effect on environmental innovations at all. A certification with at least one of these standards has a significantly positive effect on both the realization of an environmental product and a process innovation, indeed only compared with the realization of no environmental innovation. --Environmental Innovations,Environmental Organizational Measures,Discrete Choice Models,Sustainability

Increasing Energy and Resource Efficiency through Innovation: An Explorative Analysis Using Innovation Survey Data

Energy and resource efficiency innovations (EREIs) are often seen as win-win opportunities for both the economic and the environmental performance of firms. It is thus worth asking how the innovation activities and performance of firms with regard to energy and resource efficiency look like: Do EREI firms follow distinct innovation strategies? Do EREIs spur or limit innovation success? And what are the particular features of EREI firms compared to conventional innovators? Using German innovation data, the authors find that EREIs are determined by a larger set of technology-push and market-pull factors. On the supply side, R&D budgets, research infrastructure and networking with other firms are important factors of influence, while on the demand side increased productivity and cost reductions are decisive, as well as improved product quality. On the other hand, EREIs are complex activities which also need regulatory incentives. Although EREIs are not more successful compared to conventional innovations, they contribute substantially to the economic success of firms.resource efficiency, energy efficiency, environmental innovations, innovation surveys

Linking Weak and Strong Sustainability Indicators: The Case of Global Warming

The aim of this paper is to describe and discuss the weak and strong sustainability approach of assessing climate change and to show reasonable applications, weaknesses, possible improvements and linkages of both approaches. Main features of ?weak? and ?strong? sustainability approaches are characterized. Damage cost studies of global warming representing weak sustainability indicators are discussed. Further, the examples of the ?inverse scenario? approach of the German Advisory Council on Global Change (WBGU) and the environmental space concept of the Dutch Advisory Council for Research on Nature and Environment (RMNO) are described and discussed for illustrating advantages and weaknesses of strong sustainability indicators. Finally, the integration of damage cost modules into a broader methodological framework of strong sustainability is recommended. --weak sustainability,strong sustainability,environmental space,invers scenario,external costs,climate change,global wearming,damage costs

Lead Markets of Environmental Innovations: A Framework for Innovation and Environmental Economics

Environmental regulations often want to stimulate the generation and adoption of ecoefficient innovations. An important argument in the public debate is also the creation of new markets for environmentally benign products, processes and services that other countries adopt and therefore generate export opportunities for the pioneering country. The research so far concentrated on the question on how national environmental regulation can induce innovations. The question addressed in this paper is whether environmental regulations can create lead markets, enabling local firms to export innovations that are induced by local market conditions and national regulations. We identify relevant factors for lead markets of environmental innovations. So far, the lead market concept in innovation economics has only been applied to innovations in general. We extend the lead market model to environmentally friendly innovations, considering their peculiarities, in particular the public good character of environmental benefits and the role of regulations. The approach is applied to two case studies: fuel-efficient passenger cars and wind energy. In both cases, one country adopted the innovation first. Later, other countries followed the same innovation design favoured by the lead market. The lead market became a large exporter in the wind generation and car industry respectively. We discuss the regulations employed and the reasons for the international success of the innovations induced by them. We find that strict regulation has created lead markets when it was supported by a global demand or regulatory trend. --Lead markets,technological progress,environmental innovation,wind energy,fuel-efficiency

National Environmental Policy and the Global Success of Next-Generation Automobiles

In this article, we identify the most crucial factors for the potential world market success of different alternative car designs: fuel cell vehicles (FCVs), hybrid electric vehicles (HEVs), battery electric vehicles (BEVs), and conventional fuel efficient vehicles (FEVs). We first assess which vehicle concept is favoured under which regulation regime. We suggest that the global success of a certain technology critically depends on the ability of a regional lead mar-ket to leverage and transfer its local success, through large cost reductions or the international diffusion of a pioneering environmental regulation for instance. Although FCVs are still in the demonstration phase, the US has set the stage for a direct switch to FCVs. The Japanese regulatory regime favours HEVs as the next-generation engine design, while the development of the traditional combustion engine towards enhanced fuel efficiency is most likely in Europe. Due to the high cost of FCVs and the lack of strict regula-tion supporting this radical innovation, incremental innovations such as new versions of con-ventional combustion engines and hybrid cars have the best chances of becoming globally successful.Lead market, Environmental technologies, Zero emission vehicles, Fuel efficient cars