The Greening of Innovation Systems for Eco-innovation - Towards an Evolutionary Climate Mitigation Policy

Policies for mitigating climate change have never received as much attention worldwide as now. At the same time another upcoming policy trend is the increasing synthesis between innovationand environmental policy, a synthesis that is captured by the eco-innovation concept. However, the climate and innovation policy areas are currently little aligned and have in fact been considered opposites until very recently. The paper seeks to identify how evolutionary economic theory, hitherto very little applied to the environmental area, may guide the development of climate policies and eco-innovation policies in important ways. The paper argues that the evolutionary economic perspective entails a new policy rationale which not only puts more emphasis on greening of markets as a means towards reaching climate goals but also shifts the representation of the economy towards a more dynamic one. The policy implications of this shift are considerable and have hitherto gained little attention. A deeper understanding of eco-innovation dynamics is strongly needed for informing both climate and innovation policies. The paper argues that the fact that environmental problems have largely been neglected by evolutionary economic research illustrates a lack of genuine systems thinking within this line of thought, despite the prominence of systems ideas. The paper proposes a strong paradigmatic explanation of eco-innovation based on a combination of innovation systems thinking and an evolutionary capabilities approach. JEL codes: A, -, The Greening of Innovation Systems for Eco-innovation Towards an Evolutionary Climate Mitigation Policy Maj Munch Andersen and Timothy J. Foxon 1 Department of Management, Danish Technical University, Lyngby, mmua@man.dtu. dk 2 Sustainability Research Institute (SRI) and Centre for Climate Change Economics and Policy, University of Leeds, UK t.j.foxon@leeds.ac. uk Paper for ‘Eco-innovation’ Theme at DRUID Summer Conference 2009 on ‘Innovation, Strategy and Knowledge’, Copenhagen Business School, Denmark, 1820 June 2009 Draft submitted 04/05/2009 Abstract Policies for mitigating climate change have never received as much attention worldwide as now. At the same time another upcoming policy trend is the increasing synthesis between innovationand environmental policy, a synthesis that is captured by the “eco-innovation” concept. However, the climate and innovation policy areas are currently little aligned and have in fact been considered “opposites” until very recently.Policies for mitigating climate change have never received as much attention worldwide as now. At the same time another upcoming policy trend is the increasing synthesis between innovationand environmental policy, a synthesis that is captured by the “eco-innovation” concept. However, the climate and innovation policy areas are currently little aligned and have in fact been considered “opposites” until very recently. The paper seeks to identify how evolutionary economic theory, hitherto very little applied to the environmental area, may guide the development of climate policies and eco-innovation policies in important ways. The paper argues that the evolutionary economic perspective entails a new policy rationale which not only puts more emphasis on greening of markets as a means towards reaching climate goals but also shifts the representation of the economy towards a more dynamic one. The policy implications of this shift are considerable and have hitherto gained little attention. A deeper understanding of eco-innovation dynamics is strongly needed for informing both climate and innovation policies. The paper argues that the fact that environmental problems have largely been neglected by evolutionary economic research illustrates a lack of genuine systems thinking within this line of thought, despite the prominence of systems ideas. The paper proposes a strong paradigmatic explanation of eco-innovation based on a combination of innovation systems thinking and an evolutionary capabilities approach. Based on this frame the paper provides policy recommendations arguing that the innovation system concept may form a needed analytical frame for translating overall carbon reduction goals into innovation targets. The paper suggests a long run policy for creating a high innovative capacity for eco-innovation among sectoral, national and regional innovation systems.