European policy on the greening of the energy industry has been characterised by a debate between proponents of two apparent polar opposites, feed in tariffs and certificate markets. Different European countries have chosen both mechanisms and, as a consequence, the European Union has maintained a fairly pluralist position, abstaining from stricter harmonisation. Taking a dynamic innovation perspective on European energy industry, we argue that feed in tariffs and certificate markets should not be seen as competing alternatives, but rather as complementary regulatory instruments targeting subsequent steps in the product cycle, on the way from early technology-conceptualisation and development towards competitive positioning in mature energy markets. We see both policy instruments as necessary to achieve the extensive transformation towards sustainable development that is judged as important tools in the context of the global climate challenge. (c) 2006 Elsevier Ltd. All rights reserved.