Environmental Policy and Technological Change: A Comparison of the Technological Impact of Policy Instruments.

• Author: King, Alyson
• Position: Review

Environmental Policy and Technological Change: A Comparison of the Technological Impact of Policy Instruments Rene Kemp (United Kingdom: Edward Elgar, 1997) 360 pp.

It is commonly held that since technological innovation has gotten us into this fine (environmental) mess, it had better get us out of it. The question then becomes how environmentally sound innovation can best be encouraged, and this is usually taken to imply government policies: carrots and sticks. In Environmental Policy and Technological Change, Rene Kemp examines which policies have the most potential to achieve the desired end. As an econometrist turned environmental economist turned student of technology, he brings a variety of approaches to bear on the question, shedding light on the crucial interaction between technology; economics and environmental protection.

Kemp begins with a helpful overview and critique of current theoretical models on development and diffusion of less harmful technologies. He then develops models to explain how different incentives, quotas or taxes can affect the rate and type of technological innovation and diffusion. He applies these models to empirical studies of waste treatment in the Dutch food and beverage industry, the spread of household insulation and double-glazing in the Netherlands and other smaller case studies. Kemp tends to reject neoclassical models as based on untenable assumptions, though he does draw helpful conclusions from them. He prefers to work from Schumpeter's evolutionary model, which assumes that optimal choices are made ex post in the selection environment and not ex ante. As with biological evolution, chance can play a role in the policies adopted by firms, although Kemp is also an institutionalist, aware that the culture and activities of firms will have an effect on their choices. His book sets a provocative agenda for more sociological approaches to environmental innovation.

Information has quite different properties from other economic goods, being a non-rival good and infinitely reusable. Significant costs arise only in its development, and not in its transfer. Kemp accordingly distinguishes two cases on the basis of classical economic modeling. One is where the polluter is also the innovator, in which case incentive-based instruments provide a greater spur to innovation than direct control. The other is when outside agencies provide the innovation, in which case the reverse is true. The distinction is important...