Sustainable Investment and Corporate Governance Working Papers, Sustainable Investment Research Platform
No 2009/1:
Environmental policy without costs? A review of the Porter hypothesis
Runar Brännlund ()
and Tommy Lundgren ()
Abstract: This paper reviews the theoretical and empirical
literature connected to the so called Porter Hypothesis. That is, to review
the literature connected to the discussion about the relation between
environmental policy and competitiveness. According to the conventional
wisdom environmental policy, aiming for improving the environment through
for example emission reductions, do imply costs since scarce resources must
be diverted from somewhere else. However, this conventional wisdom has been
challenged and questioned recently through what has been denoted the
“Porter hypothesis”. Those in the forefront of the Porter hypothesis
challenge the conventional wisdom basically on the ground that resources
are used inefficiently in the absence of the right kind of environmental
regulations, and that the conventional neo-classical view is too static to
take inefficiencies into account. The conclusions that can be made from
this review is (1) that the theoretical literature can identify the
circumstances and mechanisms that must exist for a Porter effect to occur,
(2) that these circumstances are rather non-general, hence rejecting the
Porter hypothesis in general, (3) that the empirical literature give no
general support for the Porter hypothesis. Furthermore, a closer look at
the “Swedish case” reveals no support for the Porter hypothesis in spite of
the fact that Swedish environmental policy the last 15-20 years seems to be
in line the prerequisites stated by the Porter hypothesis concerning
environmental policy.
Keywords: Environmental policy; Costs; Porter hypothesis; (follow links to similar papers)
50 pages, January 1, 2009
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