Enhancing our understanding of the role of environmental policy in environmental innovation: adoption explained by the accumulation of policy instruments and agent-based factors

The empirical literature reports conflicting findings on the relation between environmental policy and environmental innovation: environmental policy both encourages and impedes environmental innovation, resulting in competing theoretical explanations. To find a way out of this counterproductive debate requires new and complementary insights into the effects of different policy instruments. This research therefore advances an approach in which a set of specific policy instruments as well as firms’ behavior regarding CHP (cogeneration of heat and power) adoption are considered as two distinct factors explaining environmental innovation in the Dutch paper and board industry. Using a longitudinal research design, the focus was not on any single policy instrument but on the accumulation of policy instruments. In addition, we studied intra-organizational factors influencing the adoption decision.Overall, we can conclude that paper and board factories perceive governmental environmental policies to be relevant, but that this constitutes just one of the factors influencing adoption processes, next to intra-organizational factors. The relative importance of such policies varies over time and per adoption process. The role of top-down regulation appears to be limited, whereas interactive regulation turned out to be important for several factories in the latest period of adoption. Positive economic instruments were important in almost all adoption processes, but were not and will never be the most important reason for adoption. The most important reason for CHP adoption appears to be high energy prices in combination with cost price reduction or the threat of additional regulation. For future policies, we recommend the implementation of a specific mixture of policy instruments, attuned to the specific industry and reinforcing each other. Moreover, goals should be consistent over time to avoid risk-averse behavior.