Can Environmental Regulations be Good for Business? An Assessment of the Porter Hypothesis

Abstract

The Porter hypothesis asserts that polluting firms can benefit from environmental policies, arguing that well-designed environmental regulations stimulate innovation. This is achieved by increasing either productivity or product value which leads to private benefits. As a conse quence, environmental regulations would benefit both soc iety and regulated firms. This point of view has found a receptive audience among policy makers and the popular press but has been severely criticized by economists. In this paper, we present some of the arguments in this debate and review the empirical evidence available so far in the economic literature.