This article aims to help policymakers identify how standards can contribute to the effective and cost-efficient development and deployment of eco-innovations (innovations that reduce environmental impacts). To this end, we argue that the general perception among environmental economists that standards are a very simple form of command and control regulation is too limited.
Environmental policy standards often allow for flexibility. Moreover, other types of standards are often relevant for induced innovation and diffusion. Our broad perspective enables us to identify some interesting and important economic aspects of standards, such as their contribution to the diffusion of technologies with network externalities and the extent to which they are substitutes or complements to (other) environmental policy instruments. Finally, we discuss conditions for the successful use of standards by governments to stimulate eco-innovation.