This chapter, prepared for the *Handbook of Environmental Economics*, explores the relationship between technological change and environmental policy. It begins by outlining the economics of technological change, including Schumpeter's concept of creative destruction and the role of production functions in understanding technological progress. The chapter then delves into the dynamics of invention, innovation, and diffusion, discussing the induced innovation approach and the evolutionary approach to innovation. It examines how environmental policies can stimulate the creation of new, environmentally friendly technologies and the effects of different policy instruments on these processes. The chapter also reviews empirical evidence on the impact of environmental regulations and energy prices on technological change, particularly in pollution abatement and energy conservation. Finally, it suggests areas for further research on the interaction between technology and the environment.This chapter, prepared for the *Handbook of Environmental Economics*, explores the relationship between technological change and environmental policy. It begins by outlining the economics of technological change, including Schumpeter's concept of creative destruction and the role of production functions in understanding technological progress. The chapter then delves into the dynamics of invention, innovation, and diffusion, discussing the induced innovation approach and the evolutionary approach to innovation. It examines how environmental policies can stimulate the creation of new, environmentally friendly technologies and the effects of different policy instruments on these processes. The chapter also reviews empirical evidence on the impact of environmental regulations and energy prices on technological change, particularly in pollution abatement and energy conservation. Finally, it suggests areas for further research on the interaction between technology and the environment.