There is increasing scientific evidence that natural systems are now at a level of stress globally that could have profound negative effects on human societies worldwide. In order to avoid these effects, one, or a number of technological transitions will need to take place through transforming processes of eco-innovation, which have complex political, institutional and cultural, in addition to technological and economic, dimensions. Measurement systems need to be devised that can assess to what extent eco-innovation is taking place. Environmental and eco-innovation have already led in a number of European countries to the establishment of substantial eco-industries, but, because of the general absence of environmental considerations in markets, these industries are very largely the result of environmental public policies, the nature and effectiveness of which have now been assessed through a number of reviews and case studies. The paper concludes that such policies will need to become much more stringent if eco-innovation is to drive an adequately far-reaching technological transition to resolve pressing environmental challenges. Crucial in the political economy of this change will be that eco-industries, supported by public opinion, are able to counter the resistance of established industries which will lose out from the transition, in a reformed global context where international treaties and co-operation prevent the relocation of environmentally destructive industries and encourage their transformation.