Environmental and Resource Economics 22: 41–69, 2002. © 2002 Kluwer Academic Publishers. Printed in the Netherlands. 41 Environmental Policy and Technological Change

Abstract. The relationship between technological change and environmental policy has received increasing attention from scholars and policy makers alike over the past ten years. This is partly because the environmental impacts of social activity are significantly affected by technological change, and partly because environmental policy interventions themselves create new constraints and incentives that affect the process of technological developments. Our central purpose in this article is to provide environmental economists with a useful guide to research on technological change and the analytical tools that can be used to explore further the interaction between technology and the environment. In Part 1 of the article, we provide an overview of analytical frameworks for invest-igating the economics of technological change, highlighting key issues for the researcher. In Part 2, we turn our attention to theoretical analysis of the effects of environmental policy on technological change, and in Part 3, we focus on issues related to the empirical analysis of technology innovation and diffusion. Finally, we conclude in Part 4 with some additional suggestions for research. Key words: diffusion, environmental policy, innovation, invention, technological change 1. Economic Frameworks and Issues in Technological Change Economists have examined a diverse set of issues associated with technologica