The Effects of Environmental Regulation on Innovation and Firm Performance in Europe

Since the implementation of environmental regulations in the 1970s, there has been much debate about their potential effects on affected firms. Policymakers and firm representatives fear that incomplete regulation could harm the competitiveness of domestic firms or shift pollution-intensive production processes to less strictly regulated parts of the world. The so-called Porter hypothesis, however, rejects these fears. It argues a stricter environmental policy can actually have a net positive effect on the competitiveness of regulated firms because such a policy can promote cost-reducing efficiency gains and foster innovation.

In this project, we will create a new European firm-level data set, combining information on pollution and economic indicators. As a first application in this project, we will analyse the impact of a specific environmental regulation, namely the provision of information on pollution, on firm performance and innovation behaviour in Germany. In order to initiate future projects and foster pan-European cooperation, we will host a scientific conference with international renowned researchers in the field.

Project duration: April 2019 – June 2020

Internal members, ZEW – Leibniz-Centre for European Economic Research, Mannheim:

• Robert Germeshausen, ZEW Research Department “Environmental and Resource Economics, Environmental Management”
• Kathrine von Graevenitz, PhD, ZEW Research Department “Environmental and Resource Economics, Environmental Management”
• Albert Roger, ZEW Research Department “Environmental and Resource Economics, Environmental Management”

External members:

• Prof. Dietrich Earnhart, University of Kansas (USA)
• Prof. Ulrich J. Wagner, University of Mannheim (Scientific Advisor)