Current research suggests that increased investment in advanced low-carbon technologies not only allows to further decrease reduction costs of future emissions but also that many near-commercial technologies with substantial emission reduction potential already exist. However, additional innovation and policy prioritization with a dedicated mix of policy instruments is required to accelerate the technological transition towards a deep industrial decarbonization and higher sustainability standards. Path dependence in incumbent technology regimes and market externalities for environmental innovations are two economic explanations that justify a policy-induced, directed technical change towards a desirable long-term equilibrium of green growth. In view of technological path dependencies, policymakers are, however, well advised to align their instruments to differences in companies’ willingness to introduce sustainable innovations. Constrained by past technological investments, incumbent firms are typically locked into path-dependent trajectories of their existing technology portfolio with little incentive to stimulate disruptive environmental innovations. New ventures, in contrast, are technologically unconstrained in their innovation decisions seizing regulatory push and market pull effects for sustainable market solutions with more disruptive innovations.