The relationship between government actions and innovation in environmental control technology is important for the design of cost-effective policies to achieve environmental goals. This paper examines such relationships for the case of sulfur dioxide control technology for U.S. coal-fired power plants. The study employs several complementary research methods, including analyses of key government actions, technology patenting activity, technology performance and cost trends, knowledge transfer activities, and expert elicitations. Our results indicate that government regulation appears to be a greater stimulus to inventive activity than government-sponsored research support alone, and that the anticipation of regulation also spurs inventive activity. Regulatory stringency focuses this activity along particular technical pathways and is a key factor in creating markets for environmental technologies. We also find that with greater technology adoption, both new and existing systems experience notable efficiency improvements and capital cost reductions. The important role of government in fostering knowledge transfer via technical conferences and other measures is also seen as an important factor in promoting environmental technology innovation.
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