Keywords: environmental innovation, policy instruments, resource productivity, positive externalities
Policy support for innovation to secure improvements in resource productivity
This paper presents the case for direct policy support for environmental innovation, aimed at improving resource productivity, as a complement to standard regulatory or market-based instruments of environmental policy. This case is that investments in environmental innovation create options, reduce uncertainties and give rise to positive externalities, i.e. wider benefits to society and future generations, thus reducing the long-term costs of tackling environmental problems. It is argued that these policy instruments can be classified according to how they: support basic R&D; help to develop markets for innovative new products or processes; or provide financial incentives for the development or deployment of cleaner technologies. The paper argues that more widespread adoption of such policy instruments is needed, together with systematic analysis and assessment of their effectiveness in stimulating environmental innovation in different industries and at different stages of the innovation cycle.