This paper examines the determinants of environmental innovation using German panel data from the Institute for Employment Research (IAB) and the Mannheim Innovation Panel (MIP). Environmental innovation is defined as new or modified processes, techniques, systems, and products aimed at reducing environmental damage. The study uses discrete choice models to analyze hypotheses derived from environmental innovation theory. The research finds that technological capabilities, particularly those enhanced by R&D and further education, significantly drive environmental innovation. This result is confirmed by both data sources and methods used to measure environmental innovation. The "innovation breeds innovation" hypothesis is also supported, showing that firms that were environmentally innovative in the past are more likely to be so in the present. Environmental regulation, environmental management tools, and general organizational changes are also found to trigger environmental innovation, aligning with the Porter hypothesis. Environmental management tools are especially effective in identifying cost-saving opportunities, such as material and energy savings. These cost savings are identified as a key driver of environmental innovation. The study also finds that demand pull factors, such as expected future demand, influence environmental innovation. However, the effects of past capacity utilization and economic conditions are ambiguous. The analysis of the MIP data shows that the introduction of new organizational structures is particularly important for environmental innovation. The paper highlights the importance of using panel data to capture the dynamic nature of environmental innovation, which is not possible with cross-sectional data. The findings contribute to the understanding of the factors that drive environmental innovation and provide insights for policymakers and firms aiming to promote sustainable practices.This paper examines the determinants of environmental innovation using German panel data from the Institute for Employment Research (IAB) and the Mannheim Innovation Panel (MIP). Environmental innovation is defined as new or modified processes, techniques, systems, and products aimed at reducing environmental damage. The study uses discrete choice models to analyze hypotheses derived from environmental innovation theory. The research finds that technological capabilities, particularly those enhanced by R&D and further education, significantly drive environmental innovation. This result is confirmed by both data sources and methods used to measure environmental innovation. The "innovation breeds innovation" hypothesis is also supported, showing that firms that were environmentally innovative in the past are more likely to be so in the present. Environmental regulation, environmental management tools, and general organizational changes are also found to trigger environmental innovation, aligning with the Porter hypothesis. Environmental management tools are especially effective in identifying cost-saving opportunities, such as material and energy savings. These cost savings are identified as a key driver of environmental innovation. The study also finds that demand pull factors, such as expected future demand, influence environmental innovation. However, the effects of past capacity utilization and economic conditions are ambiguous. The analysis of the MIP data shows that the introduction of new organizational structures is particularly important for environmental innovation. The paper highlights the importance of using panel data to capture the dynamic nature of environmental innovation, which is not possible with cross-sectional data. The findings contribute to the understanding of the factors that drive environmental innovation and provide insights for policymakers and firms aiming to promote sustainable practices.