Environmental Economics

Proceedings of the Conference on Cost, Innovation and Environmental Regulation: A Research and Policy Update

This report is the proceedings of a conference organized by the Environmental Law Institute (ELI) and the Center for the Study and Improvement of Regulation at Carnegie Mellon University on April 30, 1999 in Washington, DC. The objectives of the conference were to to present and synthesize current research regarding the hypothesis that the cost of implementing environmental regulations may be expected to be significantly reduced by low-cost process innovations carried out by regulated firms. The report includes a White Paper prepared by ELI entitled
Winning from Innovation: Perspectives on Business, Policy and Legal Factors that May Affect the Porter Hypothesis
and either copies of the presentations made or overheads used during the Conference by the presenters.
The White Paper attempts to identify the circumstances and reasons that may lead to the situation predicted by Professor Michael Porter where process improvements and innovations due to regulation result in cost reductions or savings to private firms. In doing so the report tests the real-world situation in which firms operate to identify social, legal and economic reasons that may lead to such win-win situations.
According to the White Paper, some authors have stated that environmental regulation, properly structured, can result in win-win situations in which production costs decline as environmental benefits rise. Professor Michael Porter has advocated such a view as part of a broader hypothesis that posits that any pressure placed on a firm that creates greater incentives to innovate may be ultimately good, as it leads to the kinds of innovation and improvement that benefits competitiveness and profitability.
The White Paper says that the Porter hypothesis in some ways conflicts with traditional economic theory, which indicates that regulations imposing additional environmental requirements on industry would tend to reduce profitability and competitiveness. Indeed, much of the economic literature points to such a negative correlation between environmental regulation and costs, it says. Another view, according to the White Paper, suggests that the costs may be partly but not entirely offset by efficiency gains which are prompted by the effort to reduce pollution in response to regulation. These economic studies would infer that environmental regulation requires a careful cost-benefit assessment that weighs the social benefits of improved environmental quality with the necessary private costs to implement any regulation.
The report is contained in two files. The second file contains the overheads for a presentation by Robert Day of the World Resources Institute entitled "The Next Bottom Line: Making Sustainable Development Tangible"; the first file contains the Table of Contents, the White Paper and all of the other presentations.

  • Keywords

    8. Other Analyses and Reports
    Environmental Media:
    f. Multimedia
    Environmental Law Institute
    EPA Project Officer/ Manager:
    Carlin, Alan
    Geographic Area:
    Study Purpose:
    Policy Evaluation
    Inventory Record #: EE-0414
  • Participating Organizations

    Research Organization:

    Environmental Law InstituteAddress: 1616 P Street, NW
    City: Washington State: DC ZIP: 20460
    Phone: Fax:
    Funding Organization:
    Environmental Protection Agency, Office of Policy, Office of Economy and EnvironmentAddress:
    City: State: ZIP:
    Phone: Fax:
  • Report Details
    Number of Pages:
    Grant/Contract #:
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    Date Linked: 05/28/2009