Economic Instruments and Induced Innovation: The Case of End-of-Life Vehicles European Policies

Abstract

SummaryThe paper addresses the dynamic-incentive effect of environmental policy instruments when innovation is uncertain and occurs in very complex industrial subsystems. The case of end-of-life vehicles (ELVs) is considered focusing predominantly on the effects of the European Directive adopted in 2000 which stipulated economic instruments as free take-back, and on the voluntary agreements in place in many EU countries. The ELV case study is an example of a framework where policy-making faces an intrinsic dynamic and systemic environment. Coherent sequences of single innovations taking place in both upstream (car making) and downstream (car recycling/recovery) of the ELV system can give rise to different "innovation paths", in accordance with costbenefit considerations, technological options and capabilities associated to the different industrial actors involved. The impact of economic instruments on innovation paths, in particular free take-back, is considered. Deficiencies or difficulties concerning the transmission of incentives between different industries can prevent the creation of new recycling/recovery/reuse markets, giving rise to other less preferable and unexpected outcomes. The implication for policy is a need for an integrated policy approach, as enforceable VAs, in order to create a shared interindustry interest for innovation and to reduce the possible adverse effects which economic instruments exert on innovation through cost benefit impacts on key industrial and waste-related agents involved in the ELV management system. These advantages should be taken into account vis à vis the emergence of Integrated Product Policy (IPP) as a leading concept of EU environmental policy and the associated shift from "extended producer responsibility" to "extended product responsibility".

Managing end-of-life vehicle networks: a longitudinal case of the UK

“…Some researchers have used less commonly applied theoretical frameworks such as political ecology in order to provide further understanding of the changes occurring in the industry (Orsato et al 2002). Importantly, the institutional fields having considerable influence on firm strategies have also been considered through various econo-political viewpoints, for example discussing the role of incentives for innovations in the end of life vehicle field especially were these may be mis-aligned or give undesirable results (Mazzanti and Zoboli 2005). Yet literature does not consider the business strategy dynamics of evolving network structures and processes, particularly at the network level.…”