Report on the bidirectional causal link between environmental policy and technology policy

The ENTRACTE research project is aiming to analyse the European climate policy portfolio with special emphasis on the role of interactions between its different parts. The project’s ultimate goal is to provide pragmatic guidance to policy makers for designing effective, cost efficient and politically and legally feasible climate policy portfolios.

The report focusses on providing empirical evidence for the bidirectional causal link between environmental policy and innovation. It was focused on the impact of command-and-control environmental policy on environmental innovation at the firm level. Using a novel dataset of Norwegian firms a positive impact was testified. Additionally, it was focused on the relationship between environmental policy and overall innovation levels. In two complementary analyses it is shown (1) that sectors facing more stringent policy increase their overall innovation level but they (2) can’t provide empirical evidence for the claim that higher innovation results in an environmental multiplier effect.

Authors: Elena Verdolini, with input from Brita Bye