Impact of environmental policy on green innovation in European Union

The objective of this study is to analyze the impact of environmental policy on “green” innovation. To address this issue we analyze the traditional determinants of green innovation in order to understand why it is necessary to implement the environmental policy. Using the sectoral data from 23 European countries we consider a specification that takes into account not only traditional determinants of innovation but also the environmental regulation. We also include the dummies sectors in order to take into account the influence of specific-unobserved characteristics of sectors across these countries. The results obtained from the regression indicate two main results: The first main result is the fact that even if stringency of environmental regulation influences positively the introduction of green innovation the voluntary agreements ratified between public authorities and industries seem to be the main motivation for introducing green innovation. The second result is the fact that some standard determinants such as technological capability and appropriability conditions of general innovation still play a role in the introduction of “green” innovation.