Using a computer simulation model spanning more than a century, this study explores the potential “crowding out” effects that arise when protective environmental policies inadvertently reduce the financial opportunities available to entrepreneurs. The principal aim is to examine the extent to which the quantity and quality of innovations produced by entrepreneurs are impacted by government policies that are intended to protect the environment. Framing these dynamics in the context of the entrepreneurship pillars developed by Baumol, Litan, and Schramm (2007), our findings suggest that government policies unintendly limiting the Coasian or Schumpertarian rents available to entrepreneurs will have an adverse long-term effect on firm formations, average firm fitness, entrepreneurial innovativeness and the achievement of sustainable growth.