► The mis-design of the early EU ETS led to increased adoption of fossil technologies. ► ETS 3 had only limited effects on the rate and direction of corporate innovation. ► Conversely, long-term emission reduction targets were an important trigger of RD&D. ► We provide recommendations for revising the policy mix (including technology policies). This article aims to empirically assess the impact of climate policy on technological change—a core objective of climate policy—by focussing on the changes it causes in the rate and direction of corporate innovation activities. To this end, we develop a cross-sectional framework based on concepts from evolutionary economics and organizational theory and, resting upon this framework, develop a set of hypotheses. We test these hypotheses using novel survey data on the electricity sector in seven EU countries. We find that the EU emission trading system (ETS) has limited and even controversial effects, and that long-term emission reduction targets are an important determinant of corporate innovation activities. Furthermore, technology policies emerge as an important element of the policy mix complementing climate policy. Based on our findings in this study, we make recommendations for policy makers on how to improve the existing policy mix.