The Porter Hypothesis at 20: Can Environmental Regulation Enhance Innovation and Competitiveness?
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The authors provides an overview of the key theoretical and empirical insights into the Porter Hypothesis, draws policy implications from these insights, and sketches out major research themes going forward, as well as highlights the major research topics going forward.Abstract:
Twenty years ago, Harvard Business School economist and strategy professor Michael Porter stood conventional wisdom about the impact of environmental regulation on business on its head by declaring that well-designed regulation could actually enhance competitiveness. The traditional view of environmental regulation held by virtually all economists until that time was that requiring firms to reduce an externality like pollution necessarily restricted their options and thus by definition reduced their profits. After all, if profitable opportunities existed to reduce pollution, profit-maximizing firms would already be taking advantage of those opportunities. Over the past 20 years, much has been written about what has since become known simply as the Porter Hypothesis (PH). Yet even today, we find conflicting evidence and alternative theories that might explain the PH, and oftentimes a misunderstanding of what the PH does and does not say. This paper provides an overview of the key theoretical and empirical insights into the PH to date, draws policy implications from these insights, and sketches out major research themes going forward.read more
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References
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Toward a New Conception of the Environment-Competitiveness Relationship
TL;DR: In this article, the authors argue that the trade-off between environmental regulation and competitiveness unnecessarily raises costs and slows down environmental progress, and that instead of simply adding to cost, properly crafted environmental standards can trigger innovation offsets, allowing companies to improve their resource productivity.
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Posted Content
Trade, Growth and the Environment
TL;DR: For the last ten years environmentalists and the trade policy community have engaged in a heated debate over the environmental consequences of liberalized trade as mentioned in this paper, which has been hampered by the lack of a common language and also suffered from little recourse to economic theory and empirical evidence.
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