A Taxonomy for Regulatory Uncertainty –

Research on environmental uncertainty typically distinguishes between different sources of uncertainty according to the different environments that a company interacts with. The regulatory environment and associated uncertainties become especially important when investigating the subject of pollution reduction. Many researchers have started to investigate the effects of environmental regulation on innovation, however, only little is known about the role of regulatory uncertainty in this context. We provide a taxonomy of regulatory uncertainties by building on the Miles and Snow scale of environmental uncertainty. We test this taxonomy by applying it to the Clean Development Mechanism, representing a flexible mechanism for the implementation of the Kyoto-Protocol. Our application follows a combined approach of literature review and interviews. Our results show that the investigated flexible instrument creates uncertainties in all categories of our taxonomy and suggest further research for deeper understanding the effects of different regulatory uncertainties on companies' business decisions.