1. Eco-innovation
Francesco Nicolli

2. Definition
“Eco-innovation is the production, application or exploitation of a good, service, production process, organizational structure, or management or business method that is novel to the firm or user and which results, throughout its life cycle, in a reduction of environmental risk, pollution and the negative impacts of resource use (including energy use) compared to relevant alternatives” (Kemp and Pearson, 2008)

3. Three foundamental points
it is based on a subjective view of innovation (i.e. the innovation has to be new for the firm),
it only considers implemented innovations (rather than activities targeted at reducing environmental impacts)
it relates environmental impacts to the state of the art.

4. Differences with respect to stanard definitions
it deviates somewhat from the traditional economic notion of innovation introduced by Schumpeter (1934) which typically regards an innovation as the first introduction of a new product, process, service or organizational structure into the market.
It means speaking about:
Creation
Adoption
Do you know the differences among these concepts?

5. This definition emphasizes results (as opposed to motivation)
According to this definition it does not matter if environmental improvements have been the primary goal of a new product or process, or came about as a by-product or simply by chance.
Eco-innovations can thus be the result of other economic rationales such as increasing market share or reducing costs.

6. Two types of eco-innovation
End-of-pipe technologies
Cleaner production (complex innovation activity with more than one aim)

7. Comunity innovation survey
See attached questionnaire

8. Determinants
Fonte: J. Horbach et al. / Ecological Economics 78 (2012) 112–122

9. DETERMINANTI: Regulation
With regulation we mean here all these environmental policies which influence product of process, like:
Taxes
Standards
Trading schemes
Subsidies

10. Feed-in Tariff (specific for renewables)
Instrument
Brief explanation
Investment incentives
Capital Grants and all other measures aimed at reducing the capital cost of adopting new technologies.
Tax Measure
Economic instruments used either to encourage production or discourage consumption. They may have the form of investment tax credit or property tax exemptions, in order to reduce tax payments for project owner.
Incentive tariff
Price systems that guarantee above market tariff rates. In such cases, the Environmental authority generally sets a premium price to be paid for power generated from renewables.
Feed-in Tariff (specific for renewables)
Guaranteed price that may vary by technology. (Wind, Solar, Ocean, Geothermal, Biomass, Waste, Hydro).
Voluntary program
These programs generally operate through agreement between government, public utilities, service suppliers, and all other stakeholders that agree to adopt green solutions.

11. Public Research and Development
Obligations (for renewable and energy)
Obligation and targets take generally the form of quota systems that place an obligation on producers to provide a share of their energy supply from renewable energy. These quota are not necessarily covered by a tradable certificate.
Tradable Certificate
Renewable energy Certificates (REC) are used to track or document compliance with quota system and can generally be traded in specific markets.
Public Research and Development
Public financed R&D program disaggregated by type of technology
Production standard or process standard
Established the first shared framework for the promotion of electricity from renewable sources at European level.

12. Static effect of Env policies
Until twenty years ago, the economic discipline was dominate by the idea that being the firms profit maximising, any attempt conducted by environmental regulation in abating pollution, would necessarily traduce in an increase of internal costs for the compliant firm. In this framework of analysis in fact, if there were profitable opportunities of reducing pollution, an optimizing firm would certainly already have adopted it. Moreover, many theoretical studies during the 1970s give support to the idea that a country comparative advantage could have been affected in a negative manner by a stringent environmental regulation.

13. Static effect of Env policies - 2
For instance, the works of Pethig (1975), Siebert (1977) and McGuire (1982), stress as environmental Policies increasing firms’ internal costs affect countries competitiveness, decreasing exports, increasing imports, and lowering the general country’s capacity to compete in an international market. Moreover, in the long-run, if the production factors are free to move across countries, a more stringent environmental regulation can produce movement of the manufacturing capacity from more regulated countries to less regulated ones (which are often called “Pollution Haven” in modern environmental and trade studies).

14. Porter Hyphotesis
First, regulation signals companies about likely resource inefficiencies and potential technological improvements
second, regulation focused on information gathering can achieve major benefits by raising corporate awareness
third, regulation reduces the uncertainty in environmental pollution activities
fourth, regulation, posing pressure on firm cost function motivates costs saving innovations
fifth regulation makes free riding behaviour in the transition phase through an innovation based equilibrium more difficult

15. Porter
Narrow Porter Hypothesis = is based on the idea that only certain types of environmental regulations, such as market-based (flexible) environmental regulations (e.g. tradable permits), can foster competitiveness. Policy design matter, standards are for instance less efficient than market-based instruments (taxes) in promoting innovation.
Weak Porter Hypothesis = environmental regulations (of any kind) can foster innovations, with no a priori expectation about the net effect on competitiveness and productivity.
Strong Porter Hypothesis = environmental regulations, either market-based or standard-based, can lead to improved competitiveness and productivity through innovation induced by the regulation, allowing as a consequence, to more than offset compliance costs.

16. Double externality problem
Output of R&D suffer of the known issue of appropriability
Negative environmental externality
Un policy mix deve tenere conto di entrambi gli aspetti

17. Market factors
Being environmentla protection a normal good, its demand increases with income
positive demand shock are expected to stimulate innovation due to higher expected returns from research investments
Income and Market size matter (e.g. renewables)

18. DETERMINANTI: Fattori Technology Push e Fattori Firm Specific
Absorptive capacity (a firm's ability to recognize the value of new information, assimilate it, and apply it to commercial ends – Cohen & levintal, 1990)
Complementarity among environemntal innovation and organisational innovation