Climate-related innovations, crowding out, and their impact on competitiveness

Within the last few decades, rising environmental concerns, particularly about global climate change, have forced policy-makers to act in an effort to mitigate further harm. Yet though greenhouse gas emissions and the wasteful use of natural resources are detrimental to the environment, policy-makers are reluctant to enact any green legislation that might undermine national competitiveness. This is the main reason why governments often fail to agree on legally binding emissions targets on the international level. Many now see the solution to lie in the development of new environmental technologies, which promise to address environmental problems while maintaining a strong economy and competitiveness. This ZEW project examines the effects of environmental technology on competitiveness, especially as it relates to the governmental regulation of pollutants. A key determinant for the proliferation of green technology - and for tackling the environmental problems they are meant to solve - is whether they produce positive returns.