On Environmental Regulation and Firm Competitiveness Relationship. Social Costs vs. Private Opportunities

The relationship between environmental regulation and firm competitiveness has been deeply investigated over the last twenty-five years, especially after the debate on the so called Porter hypothesis asserting that firms can benefit from environmental rules. Academic literature mainly focused on climate change policies, estimating the net effect of environmental regulation on macroeconomic (trade, employments, etc.) and/or on microeconomic variables (profit margins, productivity, innovations, etc.). Only recently, some studies considered environmental regulation as a source of additional costs (environmental cost), thus harming competitiveness. Conversely, other studies point out that environmental regulation improves competitiveness due to the incentives to innovation, and to the related benefits coming from it (mainly, first mover advantages). Up to now, the literature does not converge to a shared, unique view since too many times it strictly dependson the modelling approaches chosen and on the specific scenario identified. This paper offers a detailed and critical review of this large and growing literature, particularly on social and private costs, and on the main benefits related to global environmental policies.