Arguing that the performance of industrial environmental regulation is determined by the level and nature of the innovation it stimulates, this text aims to analyze the influence of different structures and styles of implementation on innovation in regulated companies. Further aims include: examining the economic and environmental performance of different forms of innovation developed and applied by industry in response to regulation; describing the conditions under which industrial environmental regulation can be improved; outlining the implementation approaches required for regulated companies to overcome barriers which prevent them from exploiting the economic and environmental potential of particular forms of innovation; demonstrating how technological and organizational change could lead to lower costs and higher benefits from regulatory compliance; and putting forward to governments and industry proposals to improve the relationship between environmental protection and industrial competitiveness.