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This article uses patent data to examine the impact of public environmental policy on innovations in environment-related technology. The analysis is conducted using data on an unbalanced panel of 77 countries between 2001 and 2007, drawing upon data obtained from the European Patent Office (EPO) World Patent Statistical (PATSTAT) database and the World Economic Forum's (WEF) ‘Executive Opinion Survey’. The results support our hypotheses concerning the positive role of both general innovative capacity and environmental policy stringency on environment-related innovation. A subsequent two-stage model assesses the factors which drive innovation in general and uses the fitted values to estimate environmental innovation. While the analysis is conducted on a smaller sample, they confirm the findings of the reduced-form model.
Johnstone et al. (Sat,) studied this question.