Numerous studies have investigated the effects of environmental policy on the incentives for firms to undertake research and development (R&D) that will lead to the development of new environmentally friendly products and/or processes. This is referred to this as environmental R&D. The starting point of this literature is the recognition that market forces will produce very weak incentives for firms to undertake environmental R&D, and so government incentives are required to correct this market failure. This chapter looks at how environmental policy affects environmental innovation if this innovation is undertaken cooperatively through the formation of environmental research joint ventures.