Introduction

It is often argued that environmental protection imposes additional costs on firms and thus has negative effects on growth and welfare. Therefore, it is not surprising that an innovation oriented environmental policy is extremely attractive for policy makers, since it is expected that innovations can cut costs of environmental measures and overcome existing trade-offs between economic and ecological goals. Consequently, one main policy strategy is to explore new ways and means to efficiently support the development, the market introduction and the diffusion of clean and sustainable technologies by designing and adopting environmental policies. For example, as the president of the European Commission Romano Prodi stated in his speech to the European Parliament: “We should now give substance to the sustainable development option, always doing more to ensure that the quality of the environment is a positive factor for innovation and thus for the competitiveness of our economy.”