Abstract

Simple growth accounting shows that the negative scale effect of economic growth on the environment can be compensated by a composition effect, increasing the weight of less polluting productions, and by a technical progress favorable to the environment, in order to make possible a sustainable growth path. To achieve this result a combination of environmental regulation and innovation policy is required. Revenues from economic instruments of environmental regulation can be earmarked to environmental friendly innovations; difficulties arise because those revenues are to be used as redistributive means to compensate the regressive nature of environmental regulation. The «case study» of the energy and climate program of President Obama is an example of the complexity of the challenge to move towards the target of a «green economy». A complementary essential role of social environmental responsibility both of consumers and firms is required.