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Environmental regulations and innovation activity in UK manufacturing industries

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  • Kneller, Richard
  • Manderson, Edward

Abstract

We examine the relationship between environmental regulations and innovation, using data from UK manufacturing industry during 2000–2006. We estimate a dynamic model of innovation behaviour, and explicitly account for the likely endogeneity of our measure of the stringency of environmental regulations (pollution abatement costs). Our results indicate that while on the one hand environmental R&D and investment in environmental capital are stimulated by greater pollution abatement pressures, on the other hand there is not a positive impact of environmental regulation on total R&D or total capital accumulation. We find some evidence that this is because more stringent environmental regulations directly lower the optimal expenditure on non-environmental innovations. In addition, we find that environmental R&D may crowd out non-environmental R&D, although there is no evidence that environmental capital crowds out non-environmental capital.

Suggested Citation

  • Kneller, Richard & Manderson, Edward, 2012. "Environmental regulations and innovation activity in UK manufacturing industries," Resource and Energy Economics, Elsevier, vol. 34(2), pages 211-235.
  • Handle: RePEc:eee:resene:v:34:y:2012:i:2:p:211-235
    DOI: 10.1016/j.reseneeco.2011.12.001
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    Cited by:

    1. Rubashkina, Yana & Galeotti, Marzio & Verdolini, Elena, 2015. "Environmental regulation and competitiveness: Empirical evidence on the Porter Hypothesis from European manufacturing sectors," Energy Policy, Elsevier, vol. 83(C), pages 288-300.
    2. Barbieri, Nicolò, 2016. "Fuel prices and the invention crowding out effect: Releasing the automotive industry from its dependence on fossil fuel," Technological Forecasting and Social Change, Elsevier, vol. 111(C), pages 222-234.
    3. Massimiliano Mazzanti & Giovanni Marin & Susanna Mancinelli & Francesco Nicolli, 2015. "Carbon dioxide reducing environmental innovations, sector upstream/downstream integration and policy: evidence from the EU," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 42(4), pages 709-735, November.
    4. Chiara Franco & Giovanni Marin, 2017. "The Effect of Within-Sector, Upstream and Downstream Environmental Taxes on Innovation and Productivity," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 66(2), pages 261-291, February.
    5. Nicolò Barbieri, 2015. "Environmental policy and invention crowding out. Unlocking the automotive industry from fossil fuel path dependence," SEEDS Working Papers 0615, SEEDS, Sustainability Environmental Economics and Dynamics Studies, revised Mar 2015.
    6. repec:gam:jsusta:v:9:y:2017:i:7:p:1240-:d:104830 is not listed on IDEAS
    7. Cainelli, Giulio & D’Amato, Alessio & Mazzanti, Massimiliano, 2015. "Adoption of waste-reducing technology in manufacturing: Regional factors and policy issues," Resource and Energy Economics, Elsevier, vol. 39(C), pages 53-67.
    8. Bostian, Moriah & Färe, Rolf & Grosskopf, Shawna & Lundgren, Tommy, 2016. "Environmental investment and firm performance: A network approach," Energy Economics, Elsevier, vol. 57(C), pages 243-255.
    9. Ghisetti, Claudia & Pontoni, Federico, 2015. "Investigating policy and R&D effects on environmental innovation: A meta-analysis," Ecological Economics, Elsevier, vol. 118(C), pages 57-66.
    10. repec:eee:eneeco:v:68:y:2017:i:s1:p:116-124 is not listed on IDEAS
    11. Morales-Lage, Rafael & Bengochea-Morancho, Aurelia & Martínez-Zarzoso, Inmaculada, 2016. "Does environmental policy stringency foster innovation and productivity in OECD countries?," Center for European, Governance and Economic Development Research Discussion Papers 282, University of Goettingen, Department of Economics.
    12. Wu, Kuo-Jui & Liao, Ching-Jong & Chen, Chih-Cheng & Lin, Yuanhsu & Tsai, Chuck F.M., 2016. "Exploring eco-innovation in dynamic organizational capability under incomplete information in the Taiwanese lighting industry," International Journal of Production Economics, Elsevier, vol. 181(PB), pages 419-440.
    13. repec:prp:uppmos:978-961-7023-53-4 is not listed on IDEAS
    14. Chiara Franco & Giovanni Marin, 2013. "The Effect of Within-Sector, Upstream and Downstream Energy Taxes on Innovation and Productivity," SEEDS Working Papers 0214, SEEDS, Sustainability Environmental Economics and Dynamics Studies, revised Jan 2014.
    15. Chia-Chin Chang, 2015. "Influences of knowledge spillover and utilization on the NIS performance: a multi-stage efficiency perspective," Quality & Quantity: International Journal of Methodology, Springer, vol. 49(5), pages 1945-1967, September.
    16. Zhang, Yue-Jun & Peng, Yu-Lu & Ma, Chao-Qun & Shen, Bo, 2017. "Can environmental innovation facilitate carbon emissions reduction? Evidence from China," Energy Policy, Elsevier, vol. 100(C), pages 18-28.
    17. Jiehui Yang & Qinglan Han & Juanmei Zhou & Chunlin Yuan, 2015. "The Influence of Environmental Management Practices and Supply Chain Integration on Technological Innovation Performance—Evidence from China’s Manufacturing Industry," Sustainability, MDPI, Open Access Journal, vol. 7(11), pages 1-20, November.
    18. Wang, Yan & Shen, Neng, 2016. "Environmental regulation and environmental productivity: The case of China," Renewable and Sustainable Energy Reviews, Elsevier, vol. 62(C), pages 758-766.
    19. Xie, Rong-hui & Yuan, Yi-jun & Huang, Jing-jing, 2017. "Different Types of Environmental Regulations and Heterogeneous Influence on “Green” Productivity: Evidence from China," Ecological Economics, Elsevier, vol. 132(C), pages 104-112.
    20. Lorena D’Agostino, 2015. "How MNEs respond to environmental regulation: integrating the Porter hypothesis and the pollution haven hypothesis," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 32(2), pages 245-269, August.

    More about this item

    Keywords

    Innovation; Pollution abatement expenditures; Panel data;

    JEL classification:

    • L6 - Industrial Organization - - Industry Studies: Manufacturing
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights
    • Q2 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation

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