Environmental Regulation and Sustainable Competitiveness: Evaluating the Role of Firm-Level Green Investments in the Context of the Porter Hypothesis

Environmental Regulation and Sustainable Competitiveness: Evaluating the Role of Firm-Level Green... We investigate the impact of environmental regulation on firm performance and investment behavior. Exploiting the case of a German water withdrawal regulation that is managed on the state level, we analyze firms’ reactions to an increase in the water tax using a regression-adjusted difference-in-differences approach. We analyze the individual firm’s response to a change in environmental regulation, distinguishing between add-on and integrated environmental investments. This allows us to include innovation diffusion into our analysis, which is likely to be of importance for increasing resource-efficiency. Our results show that the regulation in question shows no sign of affecting firms’ overall competitiveness. The results imply that the predicted negative impact of the regulation on firms’ economic performance that was brought up before the introduction of the tax, does not seem to weigh heavily in this case. Nevertheless, when placed into a sustainable competitiveness context, the regulation considered does not qualify as an appropriate policy tool for fostering green growth. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Environmental and Resource Economics Springer Journals

Environmental Regulation and Sustainable Competitiveness: Evaluating the Role of Firm-Level Green Investments in the Context of the Porter Hypothesis

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Publisher
Springer Netherlands
Copyright
Copyright © 2017 by Springer Science+Business Media Dordrecht
Subject
Economics; Environmental Economics; Environmental Law/Policy/Ecojustice; Political Economy/Economic Policy; Economics, general; Environmental Management
ISSN
0924-6460
eISSN
1573-1502
D.O.I.
10.1007/s10640-017-0128-5
Publisher site
See Article on Publisher Site

Abstract

We investigate the impact of environmental regulation on firm performance and investment behavior. Exploiting the case of a German water withdrawal regulation that is managed on the state level, we analyze firms’ reactions to an increase in the water tax using a regression-adjusted difference-in-differences approach. We analyze the individual firm’s response to a change in environmental regulation, distinguishing between add-on and integrated environmental investments. This allows us to include innovation diffusion into our analysis, which is likely to be of importance for increasing resource-efficiency. Our results show that the regulation in question shows no sign of affecting firms’ overall competitiveness. The results imply that the predicted negative impact of the regulation on firms’ economic performance that was brought up before the introduction of the tax, does not seem to weigh heavily in this case. Nevertheless, when placed into a sustainable competitiveness context, the regulation considered does not qualify as an appropriate policy tool for fostering green growth.

Journal

Environmental and Resource EconomicsSpringer Journals

Published: Mar 24, 2017

References

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