In the first decade of the 2000s, Israel experienced strong economic and demographic growth. While it has managed to reduce some of the pressures on the environment, the country still faces a number of pressing and unique environmental challenges. This chapter examines Israel’s framework for sustainable development and green growth. It analyses how Israel has used its public investment and taxation policies to pursue environmental objectives, including by removing fiscal incentives that can encourage environmentally harmful activities. The emergence of an internationally competitive, export-driven “clean-tech” industry is examined in relation to the overall innovation context and the policy framework for eco-innovation. This includes an assessment of eco-innovation performance as measured by environmentally related R&D and patenting activity. The chapter also identifies successful policies, as well as the obstacles to be overcome to fully harness the growth, employment and environmental benefits from the “clean-tech” sector.