Governance of Environment-Enhancing Technical change - past experiences and suggestions for improvement

There is much talk about environmental policies being faulty. Past policies are being criticisedfor failing to achieve environmental goals (the environmentalist complaint), for being overlyexpensive (the industrialist complaint) and for failing to encourage innovation and dynamicefficiency (the complaint of economists dealing with innovation). This paper looks at theinnovation and technology adoption effects of past environmental policies. It finds indeed fewexamples of environmental policies that stimulated innovation. The common technologyresponse is the use of expensive end-of-pipe solutions and incremental process changesoffering limited environmental gains. This begs the question: why did the policies fail topromote more radical innovation and dynamic efficiency? One explanation—well-recognisedin the economic literature—is the capture of government policies by special interests. Thispaper offers a second explanation—based on innovation and technology adoption studies—which says that in order to have a decisive and socially beneficial influence policy instrumentsmust be fine-tuned to the circumstances in which sociotechnical change processes occur and tipthe balance. Within this alternative view, the starting point of government interventions is thecapabilities, interests, interdependencies and games of social actors around an environmentalproblem instead of the set of environmental policy instruments for achieving an environmentalgoal. The paper sees a need for government authorities to be explicitly concerned with technicalchange (rather than implicitly through a change in the economic frame conditions) and to beconcerned with institutional arrangements beyond the choice of policy instruments, and act as achange agent. This requires different roles for policy makers: that of a sponsor, planner,regulator, matchmaker, alignment actor and ‘creative game regulator’. The paper offers twoperspectives on environmental policy: an instrument one and a modulation one. The latter isespecially important for promoting innovation and bringing about radical change, somethingwhich is very difficult with traditional regulatory instruments. Instruments for promotingenvironment-enhancing technical change are appraised and suggestions are offered for thepurposes for which different policy instruments may be used in differing economic contexts.