The implications for competitiveness of environmental regulations for peripheral regions in the EU

The impact of environmental regulations on the competitiveness of industry is examined with particular focus on the performance of firms in poorer E.U. regions. Previous research on the environmental policy/industrial competitiveness relationship is reviewed. A matched plant methodology is used to investigate the cost of compliance/competitiveness relationship in the dairy and meat processing industries between (the two parts of) Ireland, Italy and Germany. It is hypothesised that high productivity firms and countries can more readily adapt to regulation and absorb compliance costs. Research findings indicate that above average firm performance can be achieved with above average compliance costs. For the majority of firms sampled, environmental regulation is not reported either a major source of competitive advantage or disadvantage. Notwithstanding the lack of any tradeoff found between environmental regulation and competitiveness, it is argued that a firm'S environmental performance will become a key determinant of its economic performance. (C) 1998 Elsevier Science Ltd. All rights reserved.