The Europe 2020 Strategy has identified the key goal of smart, more inclusive and sustainable growth. In this direction, redirecting firms' innovation activities towards ecological targets without hampering their competitiveness is of paramount importance. The double externality issue related to environmental innovations makes the policy intervention crucial in order to avoid sub-optimal commitment of resources to the innovation process and ensure the reduction of polluting agents emissions. However, the positive outcome of any policy inducement mechanisms is not guaranteed, as different policy frameworks may generate different innovative outcomes. An in-depth analysis of environmental policy instruments is therefore all the more necessary in order to gain knowledge on the state of the art and evaluate the scenarios for further improvements.