Environmental policy and industrial innovation: integrating environment and economy through ecological modernisation

Ecological modernisation theory has been offered as a possible solution to the environmental problems currently facing advanced industrial countries. It suggests that regulation can help to solve environmental problems whilst at the same time making industry more competitive. In theory this can be achieved if regulation encourages the development and application of innovative technologies and production techniques. This paper examines the contribution that an understanding of innovation theory can make to this debate. An understanding of how innovation takes place suggests that to some extent regulation can achieve what is suggested by ecological modernisation theory. This is particularly the case if it helps companies to overcome the considerable barriers to innovation which prevent them from moving beyond control technologies to consider clean technologies, from complementing technological change with organisational change and from exploring the strategic as well as the operational opportunities for improvement. This argument is assessed empirically through an examination of the implementation and impact of integrated pollution control (IPC), as introduced in England and Wales as part of the Environmental Protection Act 1990. Here it is shown that there are examples of combined economic and environmental improvement in industry as a result of the implementation of IPC, particularly where pollution inspectors have helped to develop the capacity of regulated firms to respond to the regulation. However, it is also shown that IPC fails to fully establish the imperative for action on environmental issues. Thus, whilst encouraging technological and organisational changes, it fails to establish the environment as a strategic concern in industry and as a result it is unlikely to promote the radical innovations that are associated with ecological modernisation in the longer-term. (C) 2000 Elsevier Science Ltd. All rights reserved.