The Impact of Regulation on Environmental Performance: an Analysis for European Countries

Abstract

This study provides new evidence on factors driving firms´ eco innovation in the European Union, based on the data of the Community Innovation Survey for the years 2008 and 2014 for eleven European countries. First, our findings reveal that the propensity to eco-innovate changes over time. Second, the propensity to eco-innovate is unequally distributed across sectors, given that it is concentrated in a few sectors. Third, we find that sectoral behavior is strongly influenced by the taxonomy of green sectors introduced by the European Union, since the propensity to innovate is higher in the carbon leakage taxonomy than in the mitigation and adaptation taxonomy. These results provide further insights into the sectoral factors driving eco-innovation diffusion. Moreover, these findings are relevant to increase environmental stringency, as they contribute to the diffusion of eco-innovation across sectors, especially in those that do not innovate.

Keywords

• Eco-innovation
• environmental regulation
• Community Innovation Survey
• European Union
• probit regression