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How Voluntary Environmental Programs Reduce Pollution
Abstract
This article investigates the mechanisms that voluntary environmental program (VEP) participants adopt to reduce pollution. The focus of this article is the 33/50 program, a VEP introduced by the U.S. Environmental Protection Agency in 1991 and discontinued in 1995. The program called for emissions reductions for 17 chemicals reported to the Toxics Release Inventory. Using a sample of approximately 12,000 plants, the relationship between 33/50 program participation and adoption of pollution reduction practices is studied for three time periods, 1991–1995 (program life), 1996–2004, and 2005–2013. These practices include source reduction activities (SRAs) and recycling, recovery, and treatment (RRTs). The major findings are that during the program's life, 33/50 participants showed increased adoption of SRAs and RRTs for both targeted and nontargeted chemicals. However, once the program ended, higher adoption rates persisted for RRTs only, with a shift in emphasis toward treatment over recycling and recovery.
... It encourages enterprises to reduce pollution by formulating strict environmental standards and issuing emissions permits. The main feature is mandatory (Mcguire et al., 2018;Shao et al., 2020;Wu et al., 2020). The market incentive environmental regulation aims to encourage and guide enterprises to reduce pollution emissions by means of pollution fees, emissions taxes, emissions subsidies, emissions rights trading and other market means, and its main feature is incentive Xie et al., 2017). ...
... The market incentive environmental regulation aims to encourage and guide enterprises to reduce pollution emissions by means of pollution fees, emissions taxes, emissions subsidies, emissions rights trading and other market means, and its main feature is incentive Xie et al., 2017). The resource communication environmental regulation encourages enterprises to take measures such as environmental information disclosure, environmental hearing and voluntary agreement signing by means of public opinion, citizen participation and market supervision (Kumar and Shetty, 2018;Mcguire et al., 2018). However, most of the existing studies support the view that environmental regulation has a significant positive effect on environmental pollution control. ...
The Action Plan for Water Pollution Prevention and Control (i.e., the "10-Point Water Plan") is a regulation formulated by China to prevent and control water pollution and ensure China's water safety. To test the policy effect of the "10-Point Water Plan", we use data from 269 cities for the period from 2012 to 2017 to examine whether the implementation of the plan can help reduce the intensity of industrial water pollution. The results show that the industrial water pollution intensity in Central and Western China is significantly higher than that in other regions, and the implementation of the "10-Point Water Plan" significantly reduces industrial water pollution intensity in China. We further find that upgrading industrial structures and technological innovation are effective ways to ameliorate the intensity of industrial water pollution. In terms of spatial heterogeneity, the impact of the "10-Point Water Plan" on reducing industrial water pollution is smaller in areas with high environmental regulation intensity than in areas with low environmental regulation intensity. We also find a strong inhibitory effect of environmental regulations on industrial water pollution intensity in areas with low environmental regulation intensity. Our findings support the positive policy effect of the "10-Point Water Plan" and provide significant policy implications for water pollution prevention and control actions in China and other countries.
... Empirical studies on the effectiveness of VEPs and CSR policies find mixed evidence on social and ecological outcomes. Whereas some assessments of environmental effects of VEPs (with a focus on pollution) conclude that VEPs had a significant positive impact (114)(115)(116)(117), other studies concluded that they had no significant ecological impact (118)(119)(120)(121)(122)(123)(124). ...
Corporations are perceived as increasingly powerful and critically important to ensuring that irreversible climatological or ecological tipping points on Earth are not crossed. Environmental impacts of corporate activities include pollution of soils, freshwater and the ocean, depletion of ecosystems and species, unsustainable use of resources, changes to air quality, and alteration of the global climate. Negative social impacts include unacceptable working conditions, erosion of traditional practices, and increased inequalities. Multiple formal and informal mechanisms have been developed, and innovative examples of corporate biosphere stewardship have resulted in progress. However, the biosphere crisis underscores that such efforts have been insufficient and that transformative change is urgently needed. We provide suggestions for aligning corporate activities with the biosphere and argue that such corporate biosphere stewardship requires more ambitious approaches taken by corporations, combined with new and formalized public governance approaches by governments.
Expected final online publication date for the Annual Review of Environment and Resources, Volume 47 is October 2022. Please see http://www.annualreviews.org/page/journal/pubdates for revised estimates.
... Among them, the questionnaire survey was perhaps the most frequently used, with information collected from CEOs and managers (Arimura et al., 2008;Fryxell et al., 2004;Henriques & Sadorsky, 1999), regulatory officials (Tang et al., 2003), and ENGO leaders (Li et al., 2017) with respect to the changes in institutional contexts and regulation attributes at different time points . Researchers also used secondary archival data to model real-world phenomena using more sophisticated econometric methods (Lyon & Maxwell, 2007;McGuire et al., 2018). With advanced data analytic methods and computer-aided techniques, researchers are able to build large datasets with cross-sectional or longitudinal data points. ...
There has been growing complexity in the study of environmental regulatory governance. In terms of regulatory approaches, the focus of national styles has gradually shifted to the local level, down to street-level regulators. As for compliance strategies, regulated entities, particularly enterprises, have moved their strategies from the evasion-compliance dichotomy to more progressive ones that are beyond compliance. As environmental watchdogs on behalf of civil society, ENGOs, particularly those in developing and non-democratic political settings, have increasingly found more space for strategizing their active efforts to monitor enforcement agencies and polluting enterprises in the regulatory process. The spilling of regulatory regimes into developing countries has led to an urgent need for regulatory studies in such nations, with a call for new theoretical formulations that are capable of explaining regulatory governance in those countries. Research methodologies adopted have become increasingly sophisticated, moving from using a single method to using mixed methods by integrating qualitative and quantitative ones, with longitudinal studies and panel data analysis as the recent trends. This study aspires to perform a critical review of the existing body of literature on environmental regulatory governance in these major aspects as the basis for a research agenda setting.
... Klok et al. (2018) presents a fascinating look at intermunicipal cooperation through polycentric regional governance in the Netherlands, with an eye toward the costs and effectiveness of those arrangements. McGuire, Hoang, and Prakash (2018) look at the effectiveness of voluntary environmental programs in pollution reduction. Using different policy tools as lenses for analysis, Jung, Malatesta, and LaLonde (2018) ask whether work release programs are improved by working together or working alone. ...
Purpose
This study aims to identify which actors play leadership and brokerage roles in voluntary environmental collaborations and how the corporate social responsibility (CSR) of actors is associated with such voluntary networking behaviours in Cambodia.
Design/methodology/approach
To achieve these purposes, this study mainly uses social network analysis to capture the properties of networking behaviours in the voluntary collaborative activities underlying three main environmental issues: waste disposal, energy and water pollution. The study focusses on the collaborative efforts undertaken by actors across multiple sectors: governmental organizations, for-profits and civil society organizations.
Findings
The results show that the government plays the leading role in voluntary environmental collaborations across environmental issues; however, the actual implementation is expanded to be undertaken by non-state actors. Moreover, CSR has positive associations with networking and brokerage roles; therefore, this study reveals the utility of various voluntary policy instruments.
Practical implications
This study demonstrates the role of governmental initiation and its influence on non-state actors, even for voluntary environmental tools. The CSR initiatives of private actors can also be supported and encouraged by the government, which will promote participation by private actors in voluntary collaborative networks and their leading role as network facilitators.
Social implications
By understanding the positions and roles of each actor in the environmental collaborative networks, environmental policymakers can better understand the possibilities and the capabilities of each actor both to improve policy design and learning and to respond to policy changes effectively.
Originality/value
Voluntary collaboration and CSR are non-regulated policy tools; however, they can be promoted and introduced into society by governmental organizations, and they affect each other.
Many scholars have argued that systems for treating waste impede organizations from preventing waste in the first place. They theorize that end-of-pipe (EOP) treatment diminishes the incentive to avoid creating waste in the production process and obscures the information necessary to devise prevention techniques. This prediction has been widely accepted, influencing both policy and practice, despite both a lack of supporting empirical evidence and the existence of a counterprediction. In this paper, we use data describing U.S. manufacturing establishments from 1991 to 2005 to test the connection between EOP treatment and waste reduction. Our findings show that EOP treatment is associated with an initial jump in reported waste, followed by ongoing reduction. We analyze these results by exploring mechanisms that may drive this relationship. For practitioners, our paper provides critical guidance about strategies for reducing waste. For scholars of environmental management, our paper provides new insight on when facilities accomplish “source reduction” of process waste. For broader management theories of operations and organizational design, our analysis provides new insight on boundary conditions for extrapolation from existing theories. Finally, our paper provides new guidance for the formulation of effective regulatory policy.
This paper was accepted by Christian Terwiesch, operations management.
We compare the environmental performance of voluntary environmental programs (VEPs) with different attributes. Using club theory, we argue that the differential performance of VEPs is due in part to their specific design attributes that will either enhance or diminish their ability to improve both targeted and untargeted environmental impacts. We analyze two VEPs in Mexico, the global standard ISO 14001 and the local standard Clean Industry. These two VEPs differ in the stringency of the standards and in their ability to sanction noncompliant facilities. These differences ensure that firms adopting the local standard are less likely to shirk their responsibilities and enhance potential spillover effects on untargeted environmental emissions. Our empirical results support our hypotheses and show that the local Clean Industry program is more effective in improving both targeted (toxic emissions) and untargeted environmental impacts (greenhouse gas emissions).
Using data from electric utilities, this study shows that spending on well designed regulations has a positive productivity impact but that spending on less well-designed regulations has a negative effect. Better-designed regulations are flexible and grant firms latitude on how to meet goals, allow them time to deploy new means to meet goals, and set ambitious goals that stretch them beyond current practices.
Considers structural inertia in organizational populations as an outcome of an ecological-evolutionary process. Structural inertia is considered to be a consequence of selection as opposed to a precondition. The focus of this analysis is on the timing of organizational change. Structural inertia is defined to be a correspondence between a class of organizations and their environments. Reliably producing collective action and accounting rationally for their activities are identified as important organizational competencies. This reliability and accountability are achieved when the organization has the capacity to reproduce structure with high fidelity. Organizations are composed of various hierarchical layers that vary in their ability to respond and change. Organizational goals, forms of authority, core technology, and marketing strategy are the four organizational properties used to classify organizations in the proposed theory. Older organizations are found to have more inertia than younger ones. The effect of size on inertia is more difficult to determine. The variance in inertia with respect to the complexity of organizational arrangements is also explored. (SRD)
While there is little empirical evidence regarding which types of environmental management systems (EMSs) are associated with greater environmental improvements, governments worldwide are encouraging facilities to adopt them. This research compares the environmental performance of facilities that adopt ISO 14001-certified EMSs, complete (uncertified) EMSs, and incomplete EMSs, across multiple environmental media. We analyze these relationships for manufacturing facilities in seven countries using a two-stage model to control for selection bias. Our findings indicate that the adoption of all types of EMSs is related to improved environmental performance in an international setting. However, ISO 14001-certified EMSs are associated with environmental improvements to a broader array of environmental media. These findings offer important implications about which types of EMSs have greater promise as voluntary environmental governance tools.
This paper re-evaluates the effectiveness of EPA’s voluntary 33/50 program in reducing the releases of 17 high priority toxic chemicals for the 1988-1995 period. Contrary to previous studies that use program participation information at the firm level and find mixed evidence on the effectiveness of the program, our analysis uses participation status at the facility level and shows the importance of undertaking analysis at a disaggregated scale. We find the rate of reduction in releases was significantly higher for program participants than non-participants but the effect is attenuated when estimated using firm level participation data.
This article uses patent data to examine the impact of public environmental policy on innovations in environment-related technology. The analysis is conducted using data on an unbalanced panel of 77 countries between 2001 and 2007, drawing upon data obtained from the European Patent Office (EPO) World Patent Statistical (PATSTAT) database and the World Economic Forum's (WEF) ‘Executive Opinion Survey’. The results support our hypotheses concerning the positive role of both general innovative capacity and environmental policy stringency on environment-related innovation. A subsequent two-stage model assesses the factors which drive innovation in general and uses the fitted values to estimate environmental innovation. While the analysis is conducted on a smaller sample, they confirm the findings of the reduced-form model.
This study analyzes the initial implementation of the Sustainable Slopes Program a voluntary environmental initiative established by the U.S. National Ski Areas Association in partnership with federal and state government agencies. Our findings indicate that participation of western ski areas in the Sustainable Slopes Program is related to institutional pressures in the form of enhanced federal oversight and higher state environmental demands exerted by state agencies, local environmental groups and public opinion. The analysis also suggests that, despite these institutional pressures, participant ski areas appear to be correlated with lower third-party environmental performance ratings. This behavior seems to reflect the lack of specific institutional mechanisms to prevent opportunism in the current design of the Sustainable Slopes Program. That is, the program does not involve specific environmental standards, lacks third-party oversight, and does not have sanctions for poor performance.
The U.S. Environmental Protection Agency (EPA) has established numerous voluntary environmental programs over the last fifteen years, seeking to encourage businesses to make environmental progress beyond what current law requires them to achieve. EPA aims to induce beyond-compliance behavior by offering various forms of recognition and rewards, including relief from otherwise applicable environmental regulations. Despite EPA's emphasis on voluntary programs,relatively few businesses have availed themselves of these programs -- and paradoxically, the programs that offer the most significant regulatory benefits tend to have the fewest members. We explain this paradox by focusing on (a) how programs'membership screening corresponds with membership rewards, and (b) how membership levels correspond, in turn, with membership screening. Our analysis of three major case studies, as well as of data we collected on all of EPA's "green clubs," shows that EPA combines greater rewards with more demanding membership screening, which in turn corresponds with lower participation. EPA's behavior can be understood as a response to the political risks the agency faces when it recognizes and rewards businesses it otherwise is charged with regulating. Given the political constraints on EPA's ability to offer significant inducements to business, we predict participation in all but the most inconsequential voluntary environmental programs will remain quite low, thereby inherently limiting the ultimate value of voluntary programs as a strategy for advancing environmental protection.
This paper takes issue with the Porter-van der Linde claim that traditional benefit-cost analysis is a fundamental misrepresentation of the environmental problem. They contend that stringent environmental measures induce innovative efforts leading to improvements in abatement and production technologies that offset the costs of the regulations. Drawing both on basic economic theory and existing data on control costs, the authors argue that such offsets are special cases. The data indicate offsets are minuscule relative to control costs. There is no free lunch here: environmental programs must justify their costs by the benefits that improved environmental quality provides to society. Copyright 1995 by American Economic Association.
this paper, we adopt the term "industry self-regulation" because this most clearly suggests the form of institution that we are interested in -- trade association sponsored industry standards. Such standards have proliferated in recent years and consequently have attracted attention from business, government, and environmental activists (Rees, 1997). In such industry self-regulation, a group of companies join together to regulate their collective action to avoid a common threat or to provide a common good by establishing a standard code of conduct. Firms may be motivated to form such a standard by external pressure from various stakeholders. For example, regardless of their individual performance, members of an industry are often "tarred by the same brush". 5 Consequently, a few poor performers can lead to environmental regulation of the industry as a whole. As a result, companies may be compelled to join together to solve this mutual problem. Whether such industry self-regulation will work remains an area of debate (c.f. UNEP, 1999). Existing scholarship presents two conflicting visions. One viewpoint suggests that selfregulation will only work when it includes explicit sanctions to prevent opportunistic behavior among members (Grief, 1997). Penalties and sanctions, these scholars argue, are needed to prevent firms from free riding off others' efforts (Grief, 1997). Another viewpoint suggests that the need for such sanctions is overstated because the institutional structure of self-regulation can still control behavior through informal means of coercion, the transferal of norms, and the diffusion of best practice (Nash & Ehrenfeld, 1997). In this paper, we reflect on these two perspectives by investigating a leading example of self regulation without sanctions -- the...
Nonprofits seek to enhance their reputation for responsible management by joining voluntary regulation mechanisms such as accountability clubs. Because external stakeholders cannot fully observe nonprofits’ compliance with club obligations, clubs incorporate mechanisms to monitor compliance and impose sanctions. Yet including monitoring and sanctioning mechanisms increases the cost of club membership for nonprofits. What factors account for the variation in the strength of monitoring and sanctioning mechanisms in voluntary accountability clubs? An analysis of 224 clubs suggests that stringent monitoring and sanctioning mechanisms are more likely in fund-raising-focused clubs, clubs that offer certification (as opposed to only outlining a code of conduct), and clubs with greater longevity. The macro context in which clubs function also shapes their institutional design: clubs in OECD countries and clubs with global membership are less likely to incorporate monitoring and sanctioning mechanisms than clubs in non-OECD countries and single-country clubs, respectively.
Certification to the ISO 14001 environmental management standard is analyzed using data drawn from a survey of manufacturing firms in China. The analysis proceeds by first identifying predictors of ISO 14001 certification and then estimating the relationship between ISO 14001 certification and compliance with environmental regulations. Potential endogeneity between ISO 14001 certification and regulatory compliance is addressed by modeling certification and compliance simultaneously using the SURBP estimator. Results indicate that ISO 14001 certification increases compliance with environmental regulations, and this effect persists after implementing the appropriate controls for endogeneity.
Governments enact environmental regulations to compel firms to internalize pollution externalities. Critics contend that regulations encourage technological lock-ins and stifle innovation. Challenging this view, the Porter-Linde hypothesis suggests that appropriately designed regulations can spur innovation because (1) pollution reflects resource waste; (2) regulations focus firms’ attention on waste; and (3) with regulation-induced focus, firms are incentivized to innovate to reduce waste. This article explores the regulation–innovation linkage in the context of voluntary regulations. The authors focus on ISO 14001, the most widely adopted voluntary environmental program in the world. Examining a panel of 79 countries for the period 1996–2009, they find that country-level ISO 14001 participation is a significant predictor of a country's environmental patent applications, a standard proxy for innovation activity. The policy implication is that public managers should consider voluntary regulation's second-order effects on innovation, beyond their first-order effects on pollution and regulatory compliance.
When the Administrator of the United States Environmental Protection Agency (US EPA) first introduced the 33/50 Program in 1991, the concept of voluntary programs was relatively new to industry. By the time the program ended in 1996, over 1300 companies were hailing the program as a success and were calling for additional voluntary programs to replace regulatory actions wherever possible. The Program experienced successes in establishing government–industry partnerships, reducing pollution, and fostering the development of creative pollution reduction techniques within industry. This paper presents an overview of the 33/50 Program, some examples of the technologies implemented under the Program, the reasons why the 33/50 Program was successful, and how to apply some of the lessons learned under the Program to the development of future voluntary programs aimed at reducing pollution. The lessons learned from the 33/50 Program are universal, and are valuable to consider in the decision between choosing `the carrot' or `the stick' for policymakers around the world, including those in both developed and developing nations.
This research examines how traditional regulatory and voluntary approaches affect motivations to address potential harms to water quality. The traditional approach consists of governmental enforcement of mandatory requirements; the voluntary approach consists of government calling attention to potential harms and facilitating actions to address them. These approaches are best thought of as ends of a continuum rather than as the sole choices. Three sets of findings emerge from the research. One, not surprisingly, is that traditional regulation is more effective than the voluntary approach alone. A second shows that deterrent fears and the sense of duty to comply are important motivations for action. A third concerns factors that account for the variation in each motivation for which inspections, peer reputation, and attitudes toward government are shown to be important considerations. These findings point to the duality of deterrent fears and civic obligations as motivations to address potential harms.
Environmental “public voluntary programs” (PVPs) involve government offers of positive publicity and technical assistance to firms that reach certain environmental goals. A growing body of empirical work suggests these programs generally have little impact on the behavior of their participants. A natural policy conclusion would be to eliminate PVPs, but we argue that such a conclusion is premature. Many PVPs are best viewed as information diffusion programs, so identifying their effects econometrically is difficult because information is likely to diffuse to nonparticipants. Thus, after the early phases of even a successful PVP, it may well be impossible to detect a difference in the performance between participants and nonparticipants. We argue that new estimation approaches are needed to identify the effects of PVPs. We also explore the design of PVPs in detail, showing how PVPs can potentially enhance the diffusion of cost-effective techniques for pollution abatement.
Can businesses voluntarily adopt progressive environmental policies? Most environmental regulations are based on the assumption that the pursuit of profit leads firms to pollute the environment, and therefore governments must impose mandatory regulations. However, new instruments such as voluntary programs are increasingly important. Drawing on the economic theory of club goods, this book offers a theoretical account of voluntary environmental programs by identifying the institutional features that influence conditions under which programs can be effective. By linking program efficacy to club design, it focuses attention on collective action challenges faced by green clubs. Several analytic techniques are used to investigate the adoption and efficacy of ISO 14001, the most widely recognized voluntary environmental program in the world. These analyses show that, while the value of ISO 14001's brand reputation varies across policy and economic contexts, on average ISO 14001 members pollute less and comply better with governmental regulations.
This paper examines the motivations for participation in the voluntary 33/50 Program and the program's impact on the toxic releases and economic performance of firms in the U.S. chemical industry. It demonstrates that the benefits due to public recognition and the potentially avoided costs of liabilities and compliance under mandatory environmental regulations provide strong incentives for participation. After controlling for sample selection bias and the impact of other firm-specific characteristics, this paper shows that program participation led to a statistically significant decline in toxic releases over the period 1991–93. The program also had a statistically significant negative impact on the current return on investment of firms, but its impact on the expected long run profitability of firms was positive and statistically significant.
This research note examines whether trade competition abets regulatory races in the environmental area. To analyze trade competition, we develop a new measure, structural equivalence, which assesses competitive threats that a country faces from other countries whose firms export the same products to the same destination countries. Employing this new measure, we analyze air pollution intensity (sulfur dioxide or SO2) and water pollution intensity (biochemical oxygen demand or BOD) for a panel of 140 countries for the time period 1980 2003. We find that trade competition is a significant predictor of water pollution intensity among structurally equivalent countries. We then test separately whether trade competition abets upward and downward regulatory races. We find that in the case of water pollution, countries respond symmetrically to downward and upward races, that is, they follow their structurally equivalent competitor countries both when they ratchet down their regulations and when they ratchet up regulations. In the case of air pollution, however, countries are responsive to downward policy changes only in competitor countries.
Coal smoke plagued Great Britain and the United States for well over one hundred years. Cities that relied on soft coal for fuel, including London, Manchester, Glasgow, Chicago, Pittsburgh, St. Louis, and Cincinnati, all suffered through decades of dense air pollution before relief could be found. Although British cities, especially London, suffered longer under a pall of smoke, many U.S. cities experienced remarkably similar environmental problems in the late nineteenth and early twentieth centuries. Concerns about the effect of coal smoke on city residents and the urban environment loomed large in the minds of activitists on both sides of the Atlantic. Despite significant differences in economies, governance, and culture, Britons and Americans defined their problems in similar terms. Activists in the two countries engaged in roughly synchronous movements to abate smoke. Sanitarians, physicians, engineers, and lay reformers, particularly from the middle and upper classes, participated in an international discussion of the smoke problem and learned much from each others' attempts to find a solution.
The nominal efficiency of a regulatory regime is determined by comparing its social costs and benefits; the regime is nominally efficient if it produces benefits in excess of its costs. Thus, a regulatory regime can be at once nominally efficient and relatively inefficient. A regulatory regime that is nominally efficient in the early days of pollution-control efforts, when increments of environmental quality are relatively cheap, may (but will not necessarily) grow less efficient over time - producing less return on each dollar invested - as increments of environmental quality grow increasingly expensive. A regulatory regime that is more efficient in one institutional and technological setting may be less efficient (or inefficient) in another. In reality, however, this outcome will occur only under certain conditions; specifically, when the regulatory regime as a whole is more efficient. The discussion begins, for the sake of comparison, with a brief review of the "conventional" story of the Clean Air Act's regulatory regime. In addition, in 1987 the EPA wrapped up a small-scale and temporary but highly successful experiment in tradable rights to lead-content in gasoline. Like other institutions in society, those of environmental protection (including the regulatory regime itself) tend to evolve slowly, incrementally, and inconsistently. In large measure, the choice of regulatory regime depends on the goals and concerns of policy-makers.
"Across the United States and around the world, businesses have joined voluntary environmental codes proposed by governments and nonstate actors. Many codes require firms to establish internal environmental management systems that seek to improve firms' environmental performance and compliance with mandatory regulations. At the same time, governments are also experimenting with programs that provide incentives for business to self-policies their regulatory compliance, and promptly report and correct regulatory violations. In light of these two trends, this paper examines how governments' approach to regulatory enforcement can influence firms' incentives to comply with mandatory environmental laws and to join voluntary codes that could take them beyond compliance. Our inquiry shows that cooperative regulatory enforcement, in which firms self-police their environmental operations and governments provide regulatory relief for voluntarily disclosed violations, yields optimal, 'win-win' outcomes only when both sides cooperate. If firms are likely to evade compliance, governments are better off adopting a deterrence approach. And, if governments insist on rigidly interpreting and strictly enforcing the law, firms may have strong incentives to evade regulations and/or not join voluntary codes. Cooperation, though not easy, is possible if both sides can credibly signal that they will forgo opportunism."
Accepting a fixed trade-off between environmental regulation and competitiveness unnecessarily raises costs and slows down environmental progress. Studies finding high environmental compliance costs have traditionally focused on static cost impacts, ignoring any offsetting productivity benefits from innovation. They typically overestimated compliance costs, neglected innovation offsets, and disregarded the affected industry's initial competitiveness. Rather than simply adding to cost, properly crafted environmental standards can trigger innovation offsets, allowing companies to improve their resource productivity. Shifting the debate from pollution control to pollution prevention was a step forward. It is now necessary to make the next step and focus on resource productivity. Copyright 1995 by American Economic Association.
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