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The Stringency of Environmental Regulation and the 'Porter Hypothesis'

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  • Roediger-Schluge, Thomas

    (MERIT)

Abstract

Most empirical evidence indicates that the costs of environmental regulation represent a minor fraction of total production costs. This finding is at odds with the assumption of stringent environmental regulation of both propo-nents and opponents of the ''Porter Hypothesis''. A possible explanation may be provided by examining the nego-tiation of environmental regulation in a ''political market''. In this market, stakeholder attempt to ensure their pre-ferred level of stringency through influencing political decision makers. In most cases, the equilibrium stringency will require pollution abatement levels that can be met with best available technology (BAT) or predictable ad-vances over BAT. Accordingly, net benefits from environmental regulation as claimed by a ''strong version'' of the ''Porter Hypothesis'' are unlikely to emerge. On the other hand, competitiveness is equally unlikely to suffer. How-ever, compliance may impose disproportionate costs on technological laggards. The argument is illustrated with evidence from a study on the techno-economic consequences of Austrian VOC emission standards.

Suggested Citation

  • Roediger-Schluge, Thomas, 2001. "The Stringency of Environmental Regulation and the 'Porter Hypothesis'," Research Memorandum 002, Maastricht University, Maastricht Economic Research Institute on Innovation and Technology (MERIT).
    • Handle: RePEc:unm:umamer:2001002
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    File URL: https://unu-merit.nl/publications/rmpdf/2001/rm2001-002.pdf
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    References listed on IDEAS

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    1. López-Gamero, María D. & Claver-Cortés, Enrique & Molina-Azorín, José F., 2009. "Evaluating environmental regulation in Spain using process control and preventive techniques," European Journal of Operational Research, Elsevier, vol. 195(2), pages 497-518, June.

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