The determinants of environmental innovation: the impacts of environmental policies on the Nordic pulp, paper and packaging industries

Innovations may have positive societal effects such as improved environmental performance, and they are often portrayed as solutions to environmental problems. However, the mechanisms through which innovations develop and the ways in which public incentives support improved environmental performance of innovations are complex. This paper uses empirical cases to examine how environmental policies, market factors and technological push affect process and product innovations in the Nordic pulp, paper and packaging industries. The results show that environmental improvements in technologies and products are simultaneously driven by all three of these factors. Environmental innovations are often developed in anticipation of future policy or as side‐effects of existing policies. However, while environmental policy directly influences process innovations, its connection to product innovations is less clear. The study points towards the importance of gradually tightening and predictable environmental policies that are flexible enough to allow the exploration of new technological developments.