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The aim of the article. Development of regional economy potential is a sophisticated and dynamic process which depends on many external and internal factors. The increase in quantity of knowledge intensive and innovation products is considered to be one of the indicators of competitiveness and positive development of national economy. The aim of the paper is to analyze the impact of innovation activities on the environment and economic development of the national economy. Panel data analysis for 25 Ukrainian regions was used to estimate economic development - innovation relations. There was used panel data for per capita incomes, innovation expenditures, stock of fixed capital and non-renewable energy resources consumption covering the period from 2005 to 2013. There was performed a Hausman specification test and results were in favor of general least square random effect regression for data analysis. The results of the analysis. The results suggest the presence of direct links between population incomes, innovation expenditures and nonrenewable resources usage. The article states that Ecoinnovations do perform a role of fluctuations in economic systems development and may result in different unexpected effects including the growth of air pollution or increase the rate of non-renewable resources consumption. The empiric research shows that annual increase of innovation spending on ten million UAH leads to an increase in non-renewable energy resources consumption on 8.7 million tons in a region. The innovation expenditures with minimal effect do increase the missions of air pollutants. The paper states that one of the reasons of negative innovation expenditures impact on environment situation in Ukraine is due to the fact that the core of Ukrainian industrial production (before the war and social and economic crisis) was associated with mining, mechanical engineering, metallurgical and chemical products. A significant number of additional innovations in above mentioned sectors were related to environmental pollution due to the existence of rebound effects. It is underlined that any negative resource fluctuations are reflected in the memory of ecological, economic and socio-economic systems through incorporating adaptation and/or bifurcation mechanism of development. Also the increase in number of innovations by domestic enterprises is correlated with the growth of non-renewable energy resources consumption. Conclusions and perspectives of further research. The increase in innovation expenditures do statistically significantly increase with minimal absolute effect the air emissions per one square kilometer. Also the same is true for non-renewable energy resources consumption and the higher the innovation expenditures in a region the more of non-renewable energy resources is consumed. The perspectives of further research are related with more deep analysis of innovations and innovation expenditures classification, since not all innovations presented by official data are true innovations and moreover they not related to eco-innovations. In general it is eco-innovations would include new or modified process, technologies, and products which contribute to environmental sustainability and minimize damage to water, air and soil. [ABSTRACT FROM AUTHOR]