R&D for Environmental Innovation and Supportive Policy: The Implications for New Energy Automobile Industry in China

As resource scarcity and environmental degradation has aroused global concern, new energy vehicles have become the developing trend of automobile industry all over the world. However, there is lack of incentive for innovations on more environmentally friendly automobile technology. This paper introduces endogenous and directed technology progress into the growth model to analyze the decision-making on R&D of environmental technology and concludes that automobile enterprises are less willing to engage in the energy -saving technological innovation as traditional fossil-fuel-based automobile technology is relatively mature. Therefore, it is necessary for the government to formulate some temporary supportive policies at the initial stage of the development of new energy automobile industry in China, to stimulate the initiative of vehicle manufacturers to innovate on environmental automobiles.