Innovation in Environmental Technology: The Influence of Government Action on Invention in Sulfur Dioxide Control Technologies

Margaret Taylor, David Hounshell, Ed Rubin

In recent years, the environmental community has become increasingly interested in harnessing the forces of technological change in order to reduce environmental degradation. In the area of global climate change mitigation, in particular, policy-makers are very interested in promoting the invention and diffusion of environmental technologies in order to maintain economic growth in the long term while reducing greenhouse gas emissions. (Environmental technology consists of a wide range of products and processes that address environmental problems, including "end-of-pipe" and monitoring technologies, and new technologies that lower the production of pollutants.) Because a clean environment is a public good that typically provides weak market incentives for private investment and development, government actions play a key role in inducing innovation in environmental technologies.

The environmental regulatory toolbox consists of several different types of policy instruments including command and control regulation, market-based instruments, and various forms of subsidies each of which interacts with technologies related to a pollution problem in different ways. In fact, most of these instruments are designed in part with technological goals in mind: from providing first mover advantages and lock-in possibilities through "best available control technology" standards in command and control regulation, to encouraging lower cost technological options in market-based instruments, to attempting to support the appropriate level of expenditure on research, development, and demonstration through subsidies. Several theoretical studies have argued the relative innovation-inducing advantages of command and control regulation and market-based instruments, but the real (as opposed to intentional) interaction of these instruments with technological change has not been explored in considerable empirical detail.

We will examine the history of environmental legislation and technological change in the case study area of technologies used to reduce sulfur dioxide (SO2) emissions from stationary sources. We are particularly interested in exploring the complexities of invention in environmental technologies because we believe that environmental policy instruments have less intentional consequences on invention than they do on diffusion. This work will use U.S. and European patents and other quantitative and qualitative information as measures of technological responses to the implementation of environmental policy instruments.