Environmental regulations and innovation activity in UK manufacturing industries

Richard Kneller and Edward Manderson ()

Resource and Energy Economics, 2012, vol. 34, issue 2, 211-235

Abstract: We examine the relationship between environmental regulations and innovation, using data from UK manufacturing industry during 2000–2006. We estimate a dynamic model of innovation behaviour, and explicitly account for the likely endogeneity of our measure of the stringency of environmental regulations (pollution abatement costs). Our results indicate that while on the one hand environmental R&D and investment in environmental capital are stimulated by greater pollution abatement pressures, on the other hand there is not a positive impact of environmental regulation on total R&D or total capital accumulation. We find some evidence that this is because more stringent environmental regulations directly lower the optimal expenditure on non-environmental innovations. In addition, we find that environmental R&D may crowd out non-environmental R&D, although there is no evidence that environmental capital crowds out non-environmental capital.

Keywords: Innovation; Pollution abatement expenditures; Panel data (search for similar items in EconPapers)
JEL-codes: L6 O3 Q2 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (150)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:resene:v:34:y:2012:i:2:p:211-235

DOI: 10.1016/j.reseneeco.2011.12.001

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