1. Making or breaking environmental innovation? Technological change and innovation markets in the pulp and paper industry GIN2007 Conference: Sustainable Social and Ecosystem Stewardship, June 15-17, Waterloo Paula Kivimaa & Petrus Kautto Research Programme for Environmental Policy Finnish Environment Institute (SYKE)

2. Background GMCT: environmental innovations in the pulp and paper industry Successful environmental innovation, e.g. decoupling water emissions & production Environmental problems related to energy use and other sectors EU strategies highlighting environmental innovation Changes facing the sector: globalising markets, lowering paper prices, etc.

3. Research approach  Case study framework based on IS literature and our experience from innovation studies  Case studies of innovations & inventions offering potential (from a product value chain perspective) for reduced use of fossil fuels improved resource-efficiency  Case studies of environmental innovations from literature  Comments from pulp and paper industry experts

4. A market perspective on the development of environmental innovations  Various factors have been important in the innovation processes Knowledge inputs, entrepreneurialism, cooperation, public R&D support, public policies & market changes  The paper focuses solely on market factors Other results very similar to previous studies The most relevant findings from the point of view of environmental innovation Help to explain how environmental policies affect innovation

5. Changes in three types of market – existing, new, policy-created 1. Changes in existing markets for P&P products  Needs for improved efficiency, new products and new value chains 2. New/anticipated markets created by environmental policies  Bioenergy, CO2 trading, RFID tags/inlays, recyclable or recycled products 3. Changes in other sectoral markets  Facilitates innovation related to new product value chains or new energy solutions (save energy or produce renewable energy)

6. Findings from empirical cases Technological changeChange in existing P&P markets New policy-created markets Changes in other sectoral markets Biorefinery innovations Low profitability of existing products Policies for transport biofuels, emissions trading Increasing oil price, new vehicle types RFID innovationsLow profitability of existing products Extended producer responsibility for electronics Complicated supply chains BCTMP / CTMPIntensifying competition Extended producer responsibility in Germany Anticipated increased electricity prices Packaging from recycled material Increasing price of woodfibre in Denmark New policies for recycling of packaging Increased oil and plastic prices POMCosts of paper making (water emission limits in Spain)

7. Conclusions  Support for previous research: innovation needs a variety of factors to emerge  Market influence crucial for low-tech industries dominated by incumbents Simultaneous changes in three types of market!  Environmental policies can make or break the final development of environmental innovations Especially of developments occuring on industry sector borderlines  NIS vs. internationalisation NIS important in providing educational and R&D inputs & in facilitating networking BUT innovation markets increasingly dependent on international developments, including the movement of environmental policies to the EU-level