The Importance of Regulation-Induced Innovation for Sustainable Development

Abstract: This article explores the complex relationship between environmental regulation, innovation, and sustainable development within the context of an increasingly globalizing economy. The economic development, environment, and employment aspects of sustainable development are emphasized. We contend that the most crucial problem in achieving sustainability is lock-in or path dependency due to (1) the failure to envision, design, and implement policies that achieve co-optimization, or the mutually reinforcing, of social goals, and (2) entrenched economic and political interests that gain from the present system and advancement of its current trends. The article argues that industrial policy, environmental law and policy, and trade initiatives must be ‘opened up’ by expanding the practice of multi-purpose policy design, and that these policies must be integrated as well. Sustainable development requires stimulating revolutionary technological innovation through environmental, health, safety, economic, and labor market regulation. Greater support for these changes must also be reinforced by ‘opening up the participatory and political space’ to enable new voices to contribute to integrated thinking and solutions.