This paper discusses the relationship between technological change and the environment, focusing on how environmental policy can influence technological innovation and diffusion. It reviews current economic literature on the interaction between technology and the environment, and explores the normative implications of these analyses. The paper begins with an overview of the economics of technological change, then examines theories and empirical evidence on invention, innovation, and diffusion, and the effects of environmental policy on the creation of new, environmentally friendly technology. It concludes with suggestions for further research on technological change and the environment. The paper discusses the concept of induced innovation, where environmental policy can stimulate the creation of new environmentally friendly technology. It also explores the evolutionary approach to innovation, including Porter's "win-win" hypothesis. The paper then focuses on issues related to technology diffusion, including the microeconomics of diffusion, the diffusion of green technology, and the effects of instrument choice on diffusion. It concludes with observations and suggestions for future research. The paper also discusses the measurement of technological change, including the concept of the production function and productivity growth. It highlights the importance of understanding the sources of productivity improvements and the role of technological change in endogenous economic growth. The paper also discusses the challenges of measuring the productivity residual and the difficulties of distinguishing the effects of innovation and diffusion. The paper reviews the literature on the effects of environmental policy on technological change, including the effects of different types of environmental policy instruments on the rate and direction of technological change. It discusses the differences between command-and-control regulations and market-based instruments, and the potential for market-based instruments to provide powerful incentives for companies to adopt cheaper and better pollution-control technologies. The paper also discusses the importance of considering the long-term effects of environmental policies on technological change and the need for further research in this area.This paper discusses the relationship between technological change and the environment, focusing on how environmental policy can influence technological innovation and diffusion. It reviews current economic literature on the interaction between technology and the environment, and explores the normative implications of these analyses. The paper begins with an overview of the economics of technological change, then examines theories and empirical evidence on invention, innovation, and diffusion, and the effects of environmental policy on the creation of new, environmentally friendly technology. It concludes with suggestions for further research on technological change and the environment. The paper discusses the concept of induced innovation, where environmental policy can stimulate the creation of new environmentally friendly technology. It also explores the evolutionary approach to innovation, including Porter's "win-win" hypothesis. The paper then focuses on issues related to technology diffusion, including the microeconomics of diffusion, the diffusion of green technology, and the effects of instrument choice on diffusion. It concludes with observations and suggestions for future research. The paper also discusses the measurement of technological change, including the concept of the production function and productivity growth. It highlights the importance of understanding the sources of productivity improvements and the role of technological change in endogenous economic growth. The paper also discusses the challenges of measuring the productivity residual and the difficulties of distinguishing the effects of innovation and diffusion. The paper reviews the literature on the effects of environmental policy on technological change, including the effects of different types of environmental policy instruments on the rate and direction of technological change. It discusses the differences between command-and-control regulations and market-based instruments, and the potential for market-based instruments to provide powerful incentives for companies to adopt cheaper and better pollution-control technologies. The paper also discusses the importance of considering the long-term effects of environmental policies on technological change and the need for further research in this area.