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Journal of Economic Perspectives: Vol. 9 No. 4 (Fall 1995)

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Toward a New Conception of the Environment-Competitiveness Relationship

Article Citation

Porter, Michael E., and Claas van der Linde. 1995. "Toward a New Conception of the Environment-Competitiveness Relationship." Journal of Economic Perspectives, 9(4): 97-118.

DOI: 10.1257/jep.9.4.97

Abstract

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.

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Authors

Porter, Michael E. (Harvard U)
van der Linde, Claas (International Management Research Institute, St Gallen U)

JEL Classifications

Q20: Renewable Resources and Conservation: General
O31: Innovation and Invention: Processes and Incentives

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