Wuppertal Paper 123

Cognitive and institutional perspectives of eco-efficiency 2 Wuppertal Papers are scientific working papers of a preliminary character aimed at promoting scientific discourse. Comments and contributions to the discussion are expressly desired by the authors. As a report from a research process not yet concluded, the contents do not necessarily reflect the opinions of the Wuppertal Institute. Slight deviations between the printed version and the PDF version are possible. For example, blank pages have been omitted in this PDF document. Therefore, if you are quoting from the PDF version, we suggest that you indicate this in brackets: " PDF version ". Abstract The paper sketches out a theoretical framework for analysing the interplay between eco-efficiency, cognition and institutions. It derives from analytical shortfalls of the prevailing literature, which features strongly engineering and business economics, by using insights from New Institutional Economics, from Cognitive Sciences and, partly, from Evolutionary Economics. It emphasises the role cognition and institutions play in the adoption of " green " technologies by firms. A cognitive perspective derives from recent research on simple heuristics and context-based rationality; it is proposed that those recent findings can serve to analyse decision-making of individual actors or firms and, thus, should complement economic analysis. A second proposition is that eco-efficiency and normative rules such as a Factor Four strongly rely upon institutions, i.e. the ability of institutions to evolve over time and the development of those institutions that are most appropriate to enhance technological change. In this regard, business institutions and competition are crucial, but regulatory needs remain in order to safeguard continuity of knowledge creation. The framework allows for an analysis why overall adoption of eco-efficiency still can be considered relatively slow and why some markets and firms are far ahead. As a brief case study the article reflects upon German waste law's ability to enhance eco-efficiency. Cognitive and institutional perspectives of eco-efficiency 4