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Environmental policies are a significant driver of change towards the achievement of sustainability. Policies impact on the environment through direct and indirect effects. Indirect effects pertain to the effect of innovation and invention mechanisms. The paper analyses those direct and indirect effects by focusing on different measures of environmental productivity. Econometric analysis on a long macroeconomic panel dataset is used to convey original insights, and as a platform for policy assessments. Results show that environmental policies adopted by countries may boost environmental productivity performances both directly and indirectly, through innovation, across various environmental dimensions. The increasing stringency of environmental policy, which has been observed over the last decades, is a crucial driver of change for climate actions, waste and resource efficiency, touching upon various SDGs related to responsible consumption and production, economic growth, industry and innovation infrastructures and climate action. [ABSTRACT FROM AUTHOR]