The role of policy instruments in the innovation and diffusion of environmentally friendlier technologies: popular claims versus case study experiences

Moving towards sustainability will require that new environmentally friendlier technologies are developed and widely adopted. Policy instruments that promote eco-efficiency are therefore necessary. Some claims frequently made in the literature on the relationship between policy instruments and technological development are examined. The claims concern regulations, environmental taxation and funding of research and development. The claims are explored on the basis of empirical evidence from two sectors: the pulp and paper industry and the marine engine industry. Little support was found for some of the claims, in some cases even contradictory findings, and for some claims the findings differed between the sectors and even within a sector, depending on the issue.