How Policies Stimulate Innovations– Evidence from Dioxin Emissions and Home Appliances Recycling

Abstract

How environmental policies affect technological developments and economic competitiveness has been an enduring question among engineers as well as economists. This paper attempts to clarify the impact of Japanese waste management policy on technological innovation using dioxin emissions from incineration and the recycling of home electric appliances in Japan as two case studies. We discuss the policy relevance of streamlining push-pull relationships between knowledge creators and technology users. We found that technological innovations usually start with social concerns regarding environmental issues (demand pull).The government then introduces policies to meet those concerns and the industry develops new technologies to comply with such policy requirements (technology push).For our case studies, relevant Japanese patent data were gathered for the period 1990-2008. To demonstrate that environmental regulations induce technology innovation, we conducted statistical analysis to compare the number of patents related to each regulation between the period under regulation and period outside the regulation. In order to control for the potential exogenous of factors such as business cycles and demand changes on technological development, we compared the ratios of the case studies related patents to the total number of environmental-related patents. The result show that the number of related patents for most technological types is larger after the regulations were introduced. The result also show a decreasing pattern in patent citations once the targets have been met suggesting a possible weakness in these types of regulations due to lack of incentives for further innovations.