`Eco-friendly' variants are rapidly gaining market share in many industries such as food, textiles, furniture, detergents and paints, automobiles, electrical appliances and domestic energy. These markets usually exhibit environmental differentiation, where consumers differ in their willingness to pay for the environmental attributes of a product. Building on the existing literature, this novel book provides a comprehensive analysis of firm strategy and environmental policy making in these types of `green' markets. The author introduces the model of an environmentally differentiated duopoly, in order to explicitly analyse the strategic interaction within such a market. He studies in detail the effects of environmental product standards, eco-labels, `green' R&D subsidies and environmental taxation on firm behaviour, welfare and emissions. Non-technical sections providing the empirical context expertly complement the formal theoretical analysis of environmental policy making. The author goes on to present important new conclusions for environmental policy and an agenda for future research. The Greening of Markets will be of immense interest to students and academics of environmental economics and applied industrial organisation, as well as policy makers and environmental managers.