This paper explores how governments can promote environmentally-friendly technologies while sustaining national competitiveness. Taking the Porter Hypothesis as its starting point, it reviews how the literature on innovation-oriented environmental policy has evolved, outlining governance approaches from evolutionary and system-based perspectives. These approaches are then related to current debates on industrial policy and national competitiveness. The paper finds the policy approaches emerging from this debate to be largely compatible with the approaches to innovation-oriented environmental policy. It, therefore, concludes that there is no inherent contradiction between promoting environmental policy goals and national competitiveness. Rather, drawing on the literature on lead markets for environmental innovations, it argues that national competitiveness increasingly depends on the development of integrated policies for promoting environmental and economic policy goals.