The project analysed the conditions for the emergence of lead-markets for innovations of a sustainable development. It has developed policy-recommendations which are able to support the world-wide diffusion of environmental friendly technologies. We understand Lead-markets as regional or national markets, which were stimulated by higher preferences for environmental goods in a given country, specific supporting measurements, or policy interventions to the market, which are able to influence the competition in other regions effectively, do trigger reactions of adjustment and finally lead to an international diffusion of the new technologies. By this, we take into account that sustainability innovations have to be largely ascribed to governmental activities. Successful exporting activities of certain industries often have been supported by national environmental regulations and the international diffusion of environmental standards. Conversely measurements for environmental protection by pioneering countries often have set the standards for multinational enterprises, which then supported diffusion processes for both technologies and regulations. Thereby, the innovation and diffusion of policies and technologies are most often closely associated. For a targeted ecological modernization of international markets aiming at a sustainable development the potential of national states for a framing of national markets - which is the main focus of this project - might gain considerable importance - especially considering the effects of economic globalization. The history of environmental protection is rich of examples for lead-markets: it encompasses the legally enforced introduction of catalytic converters for automobiles in the USA, the Danish support for wind energy or the CFC free refrigerator. But there are failures as well: a lot of technical improvements for the environment were established on national markets only, without having international diffusion effects. National regulations, which support certain innovations often could not be established as an international standards, also. The project focuses on the framework conditions for a development of early pilot markets which are regionally or nationally limited to lead-markets with international importance. Research on lead markets in innovation economics suggests, that a range of central conditions has to be fulfilled in order to establish a pilot market as a lead market. Among these criteria are advantages in prices and costs, advantages in demand, export, transferability of innovations and benefits regarding the structure of the market. However, these conditions do not consider political and societal guidelines, yet. Also the characteristics of sustainable development are not reflected. Regarding these influencing factors additional conditions for success were identified in the project. Innovations for a sustainable development are novelties which are wanted by policy and society. A well directed policy supporting these innovations requires a complex framework which has to be empirically validated - above common mechanistic concepts of governance. A policy framework encompasses all calculable rules, strategies and context for action in a given domain of political regulation. The interdisciplinary research project aims to clarify the conditions for the development of lead markets for sustainable, i.e. both environmentally as well as economically and socially acceptable products and processes and in how far these conditions can be improved by well directed political action. Pilot markets are regional markets for new technologies, which haven't (yet) been -successful internationally - just in opposite to lead markets. By this, a pilot market is defined by an innovation and its regional boundaries. In the context of company management pilot markets are limited test markets for new products which are considered to be representative for larger units. In case of a successful market introduction conclusions are drawn regarding larger markets. For this project, it is not the regional success (or failure) of an innovation, but it focuses on the international dissemination, i.e. the diffusion of sustainable innovations. A regional market, where these diffusion effects are lacking is a failure in terms of this project, while a successful diffusion on the world market justifies the term "lead market". However, a successful international diffusion most often starts from a regional pilot market. The analysis of the conditions for a successful development of regionally limited pilot markets to international lead markets for sustainable innovations was the primary interest of the project. All in all the world wide diffusion of environmental standards (which can be described as a innovation diffusion of policies) has been accompanied by a broad stream of technical innovations and their respective diffusion. The interplay between technical and regulatory innovations, which is specific for sustainable innovations, has been analyzed systematically in the course of the project. The project allows propositions on the interdependency between technical and political innovation and diffusion. The dependency of sustainable innovations on regulations might lead to restrictions in the international diffusion because these regulations do depend heavily on the respective national social, cultural and political factors. By this, a national regulation might focus on a local market only, or even worse, it might produce solutions which cannot be transferred to other countries. The approach has analysed the interplay between advantageous market conditions, types of innovations, regulatory frameworks, and international mechanism for diffusion to be responsible for the emergence of a lead market. These distinct domains for research (markets and competitiveness, policy frameworks, and mechanisms of transfer) will be analyzed from the perspective of several theoretical approaches. The project team has developed an interdisciplinary theoretical approach. The projects work plan encompassed five phases of research: 1. The review and merging of methodological and theoretical approaches in the intersection of environmental economics, innovation research and policy analysis. 2. Secondary analysis of empirical literature about the international diffusion of environmental innovations; 16 completed cases of technical innovations have been analyzed including investigations on aspects of lead market properties. 3. Development of a common framework of analysis and a set of hypotheses on this basis. 4. In depth studies of selected international case studies of successful approaches and failures in the development of lead markets for sustainable innovations. 5. The development of a policy framework, which is able to promote the international innovation and diffusion in terms of a sustainable development by the development of lead markets. The project is handled by a consortium including the German institute for economic research (DIW), Berlin, the Environmental Policy Research Unit at the Freie Universität Berlin (FFU), the Institute for Ecological Economic Research, Berlin (IÖW) and the Center for European Economic Research (Mannheim). Members of the project team are Dr. Dietmar Edler and Prof. Dr. Jürgen Blazejczak (DIW), Prof. Dr. Martin Jänicke and Dr. Klaus Jacob (FFU), Ulrich Petschow and Thomas Loew (IÖW) as well as Dr. Klaus Rennings and Marian Beise (ZEW). The project coordination is managed by the Environmental Policy Research Unit. ZEW has contributed aspects from innovation economics regarding the analysis of lead markets. The in depth studies of the ZEW in the second phase of the project were fuel cells in low emission cars and photovoltaic cells.