Drivers of environmental innovation - Vinnova

Table 1
Summary of innovation effects of regulations
Effects on
innovations
• diffusion, incremental
innovations
• innovation outside
regulated sector
• affect small firms less
than big
• search process also
before implementation
Theoretical
pros & cons
+ certainty of the policy
result
+ authorities have much
experience
- inefficiency due to
increasing marginal
costs
- much work for
government may cause
lagging standards
- no effect after
compliance is achieved
- inefficiency due to that
compliance cost varies
between firms
- lock-in effects
Recommendations
• stringency
• flexible response to
failure of compliance
• sectoral adaptation
• continuous review of
technical standards
Liability law
Liability law should also be included among the regulatory instruments as it
provides the judicial basis for law suits against firms that inflict ecological
harm.
Liability law provides a large degree of freedom for the firms to choose
measures and the risk level of their strategies. There are two types of liability
principles: liability based on fault and liability regardless of fault. The former
tend to give static innovation incentives as firms can restrict themselves to
comply with standards of due care. Liability regardless of fault gives raise to a
general and dynamic interest in innovations on the part of firms. There are also
various types of limited liabilities. Limitations require third parties to pay the
bill of caused damages and are unlikely to lead to full internalisation of costs.
Problematic may be that the injured third party may be in a weaker position
with regard to the information needed for proving the causality between action
and damage. Firms and authorities are likely to be in stronger positions
(Hemmelskamp, 1997)
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