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Environmental economics

Economic analysis of eco-innovation

Designing Policy to Influence Consumers (2009)

30 years of Nobel prize winning research shows that consumers make choices through a mix of mental shortcuts, emotion and conscious deliberation. Yet, EU policies usually assume consumers only make conscious deliberation. For instance, it is often assumed more information is a good thing - but the opposite is shown to be true. Designing policies based on how consumers actually make choices would be likely to significantly improve policy outcomes and suggests the use of new instruments. This report summarises the global knowledge from marketing and economic research and makes clear the significant implications for the organisation of the Commission's policy work, and its range and design of instruments for greening consumer choice. It is also a fascinating insight into our own mental processes.

Bridging the Valley of Death: public support for commercialisation of eco-innovation (2009)

The report recommends the Commission and Member States to use greater demand-side innovation policy to tackle constraints on eco-innovation. It analyses the experience of existing innovation procurement policies. A major block to greater eco-innovation is the uncertainty over future market demand for an innovation. That uncertainty partly reflects an information failure: buyers do not indicate they will buy until the innovation is put on the market. This block can be mitigated cost-effectively if groups of market players are brought together to indicate the characteristics of an innovation that they would be likely to buy. This needs to be coupled with pre-announced use of demand-support measures, in an expansion of current EU demand-side innovation policy. The report analyses the areas of innovation where this would be successful and identifies the practical needs of the policy.

The Potential of Market Pull Instruments for Promoting Innovation in Environmental Characteristics (2009)

Firms select which innovations to commercialise on the basis of expected future demand. Those expectations are based on assessments of trends in demand and the innovation undertaken by competitors. Policy measures which signal increased future demand, or rewards, for certain innovations (e.g. energy efficiency) have the potential to boost innovation rates. The effect could be substantial - an increase in energy efficiency improvement by only 2%/year could lead to new products being 25% more efficient in 15 years time. This study examines the potential of policy instruments - for example financial incentives for products - to increase innovation, how they influence firms' decisions and how such instruments (or existing related policy instruments) should be designed to maximise the increase in innovation. The report is aimed at EU, regional and national policy instruments, with a focus on environmentally advantageous innovation.

Mainstreaming innovative and green business models (2008)

Innovation with significant environmental benefits is not limited to technological change. This study - aimed at business and policy makers - shows that greater adoption of different forms of business models can also bring great environmental benefits. In many situations, firms can offer a combination of products and services (rather than either alone) which achieve the buyer's objectives but incentivises resource saving in doing so, allowing both buyer and seller to achieve greater profits. The study lists successful examples - for example chemicals management, where the chemical supplier is paid to achieve the objective of the use of chemicals (rather than the sale of a volume of chemicals) so is incentivised to use their specialist knowledge to save costs by reducing volumes used. The study recommends greater action to spread such business models, estimating potentials for economic and environmental benefit and ways in which the models can be promoted.

Effective Environment Policy: Design for innovation (2007)

Innovation - changes in the way people do something, or changes in technology - is one of the main, sometimes only, way our policy achieves its environmental goals. Designing policy in ways that stimulate or allow this innovation will achieve policy goals more effectively, faster, or more cheaply. This contract examined how to design environment policy to do that, and produced a clear, 1 page list of questions for policy makers to consider, backed by directly linked advice. Covers subjects such as "Will standards be sufficiently stringent, stable, clear, long-term and set well in advance?" This complements current IA guidance.

Innovation dynamics induced by environmental policy (2006)

This study analyses how different environmental policy instruments induce innovation and to what extent this can reduce the environmental impacts of products and processes. The findings of this study are based on a literature survey, five case studies and an expert workshop. It finds that environmental policy’s role in innovation is a steering one, rather than braking or driving role as it is only one among many factors. Synergies and ‘autonomous’ trends towards cleaner technology do occur, but are by no means guaranteed. Innovation-oriented environmental policy remains essential for sustainable technological development and, also, environmental policy will in general not be an obstacle to R&D.

Case Studies of links between Environmental Policy and Employment (2003)

The following study was undertaken for the Commission by Association Européenne Pour L'Information Sur Le Développement Local (AEIDL) and is a compilation of 58 case studies. Each of the case studies identifies a link between environmental policy and expenditure and direct local employment effects. The study did not seek to identify any indirect effects on employment which may offset the direct impacts. The Commission is not responsible for any errors in the summaries.