The Impact of Environmental Regulation on the Investment Climate

Authors

DOI:

https://doi.org/10.17159/1727-3781/2023/v26i0a16378

Keywords:

Environmental regulation, investment, World Bank, federalism, competition, environmental quality, centralisation, race-to-the-bottom, race-to-the-top

Abstract

In this contribution to honour Willemien du Plessis we use the economic approach to law to explain how environmental law affects economic development and vice-versa. The contribution starts by presenting the Environmental Kuznets Curve that makes clear that environmental regulation should not retard economic development but that, on the contrary, environmental protection and economic growth can go hand-in-hand, provided there is environmental regulation. The contribution further discusses the idea of competition between legal orders and how this affects environmental law, and to this end both the race to the bottom as well as the race-to-the-top are discussed. Finally, attention is paid to the role of environmental law in economic development.

Downloads

Author Biography

  • Michael Faure, Maastricht University

    professor of comparative and international environmental law, Maastricht University and professor of comparative private law and economics, Erasmus School of Law, Rotterdam, both in the Netherlands

References

Bibliography

Literature

Acemoglu D, Johnson S and Robinson JA "The Colonial Origins of Comparative Development: An Empirical Investigation" 2001 Am Econ Rev 1369-1401 DOI: https://doi.org/10.1257/aer.91.5.1369

Ambec S et al "The Porter Hypothesis at 20: Can Environmental Regulation Enhance Innovation and Comparativeness?" 2013 REEP 2-22 DOI: https://doi.org/10.1093/reep/res016

Armour J et al "Law and Financial Development: What We are Learning from Time-Series Evidence" in Faure M and Smits J (eds) Does Law Matter? On Law and Economic Growth (Intersentia Antwerp 2011) 41-98

Arrow K et al "Economic Growth, Carrying Capacity and the Environment" 1995 Ecological Economics 91-95 DOI: https://doi.org/10.1016/0921-8009(95)00059-3

Ayres RU "Economic Growth: Politically Necessary but not Environmentally Friendly" 1995 Ecological Economics 97-99 DOI: https://doi.org/10.1016/0921-8009(95)00073-9

Beckerman W "Economic Growth and the Environment: Whose Growth? Whose Environment?" 1992 World Development 481-496 DOI: https://doi.org/10.1016/0305-750X(92)90038-W

Braun B "Locational Response of German Manufacturers to Environmental Standards" 1998 Tijdschrift voor Economische en Sociale Geografie 253-263 DOI: https://doi.org/10.1111/1467-9663.00026

Cole MA, Rayner AJ and Bates JM "The Environmental Kuznets Curve: An Empirical Analysis" 1997 Environment and Development Economics 401-416 DOI: https://doi.org/10.1017/S1355770X97000211

Dasgupta S et al "Confronting the Environmental Kuznets Curve" 2002 Journal of Economic Perspectives 147-168 DOI: https://doi.org/10.1257/0895330027157

De Bruyn SM "Explaining the Environmental Kuznets Curve: Structural Change and International Agreements in Reducing Sulphur Emissions" 1997 Environment and Development Economics 485-503 DOI: https://doi.org/10.1017/S1355770X97000260

Du Plessis W "Legal Mechanisms for Cooperative Governance in South Africa: Successes and Failures" 2008 SA Public Law 87-110

Esty D "Revitalising Environmental Federalism" 1996 Mich L Rev 570-653 DOI: https://doi.org/10.2307/1290162

Esty D and Geradin D "Environmental Protection and International Competitiveness. A Conceptual Framework" 1998 Journal of World Trade 5-46

Esty DC and Porter ME "Industrial Ecology and Competitiveness: Strategic Implications for the Firm" 1998 Journal of Industrial Ecology 35-43 DOI: https://doi.org/10.1162/jiec.1998.2.1.35

Esty DC and Porter ME "National Environmental Performance: An Empirical Analysis of Policy Results and Determinants" 2005 Environment and Development Economics 391-434 DOI: https://doi.org/10.1017/S1355770X05002275

Esty DC and Porter ME "Ranking National Environmental Regulation and Performance: A Leading Indicator of Future Competitiveness" in Porter ME et al (eds) The Global Competitiveness Report 2001-2002 (Oxford University Press New York 2002) 78-100

Faure MG "Optimal Specificity in Environmental Standard-Setting" in Dias Soares C et al (eds) Critical Issues in Environmental Taxation: International and Comparative Perspectives Vol III (Oxford University Press Oxford 2010) 730-745

Faure M "Regulatory Competition vs Harmonisation in EU Environmental Law" in Esty DC and Geradin D (eds) Regulatory Competition and Economic Integration (Oxford University Press Oxford 2001) 263-286 DOI: https://doi.org/10.1093/oso/9780198299059.003.0012

Faure MG and Johnston JS "The Law and Economics of Environmental Federalism: Europe and the United States Compared" 2009 Va Envtl LJ 205-274 DOI: https://doi.org/10.2139/ssrn.1098493

Frey B and Eichenberger R "To Harmonise or to Compete? That's not the Question" 1996 Journal of Public Economics 335-349 DOI: https://doi.org/10.1016/0047-2727(95)01555-8

Grossman GM and Krueger AB "Economic Growth and the Environment" 1995 Quarterly Journal of Economics 353-377 DOI: https://doi.org/10.2307/2118443

Grossman GM and Krueger AB "Environmental Impacts of a North-American Free Trade Agreement" in Garber PM (ed) The US, Mexico Free Trade Agreement (MIT Press Cambridge 1993) 13-56

Helland E and Klick J "Legal Origins and Empirical Credibility" in Faure M and Smits J (eds) Does Law Matter? On Law and Economic Growth (Intersentia Antwerp 2011) 99-113

Hirschman AO Exit, Voice and Loyalty. Responses to Decline in Firms, Organisations and States (Harvard University Press Cambridge 1990)

Hotelling H "Stability in Competition" 1929 Economic Journal 41-57 DOI: https://doi.org/10.2307/2224214

Inman R and Rubinfeld D "The EMU and Fiscal Policy in the New European Community: An Issue for Economic Federalism" 1994 Int'l Rev L Econ 147-161 DOI: https://doi.org/10.1016/0144-8188(94)90014-0

Jaffe A et al "Environmental Regulation and the Competitiveness of US Manufacturing: What Does the Evidence Tell Us?" 1995 Journal of Economic Literature 132-163

Kirchgässner G and Pommerehne W "Tax Harmonisation and Tax Competition in the European Community: Lessons from Switzerland" Unpublished paper presented at the Cost Meeting (November 1993 Luzern)

Klick J "Shleifer's Failure" 2013 Tex L Rev 899-909

Kloppers H and Du Plessis W "Corporate Social Responsibility, Legislative Reforms and Mining in South-Africa" 2008 Journal of Energy and Natural Resources Law 91-119 DOI: https://doi.org/10.1080/02646811.2008.11435179

Konisky DM "Regulatory Competition and Environmental Enforcement: Is There a Race-to-the-bottom?" 2008 American Journal of Political Science 853-872 DOI: https://doi.org/10.1111/j.1540-5907.2007.00285.x

Kuznets S "Economic Growth and Income Inequality" 1955 Am Econ Rev 1-28

La Porta R, Lopez-de-Silanes F and Shleifer A "The Economic Consequences of Legal Origins" 2008 Journal of Economic Literature 285-332 DOI: https://doi.org/10.1257/jel.46.2.285

La Porta R et al "The Quality of Government" 1999 Journal of Law, Economics, and Organization 222-279 DOI: https://doi.org/10.1093/jleo/15.1.222

La Porta R et al "Investor Protection and Corporate Valuation" 2002 Journal of Finance 1147-1170 DOI: https://doi.org/10.1111/1540-6261.00457

List JA, McHone W and Millimet DL "Effects of Air Quality Regulation on the Destination Choice of Relocating Plants" 2003 Oxford Economic Papers 657-678 DOI: https://doi.org/10.1093/oep/55.4.657

Livermore MA "The Perils of Experimentation" 2017 Yale LJ 636-708

Millimet DL and List JA "The Case of the Missing Pollution Haven Hypothesis" 2004 Journal of Regulatory Economics 239-262 DOI: https://doi.org/10.1007/s11149-004-7550-7

Oates W Fiscal Federalism (Harcourt Brace Jovanovich New York 1972)

Oates W and Schwab R "Economic Competition among Jurisdictions: Efficiency Enhancing or Distortion Inducing?" 1988 Journal of Public Economics 333-354 DOI: https://doi.org/10.1016/0047-2727(88)90036-9

Ogus A "Competition between National Legal Systems. A Contribution to Economic Analysis to Comparative Law" 1999 ICLQ 405-418 DOI: https://doi.org/10.1017/S0020589300063259

Partain R "The Legally Pluralistic Tourist" in Sonnenburg S and Wee D (eds) Touring Consumption. Management – Culture – Interpretation (Springer VS Wiesbaden 2015) 261-284 DOI: https://doi.org/10.1007/978-3-658-10019-3_12

Porter M "America's Green Strategy" 1991 Scientific American 168-179 DOI: https://doi.org/10.1038/scientificamerican0491-168

Porter ME and Van der Linde C "Towards a New Conception of the Environment – Competitiveness, Relationship" 1995 Journal of Economic Perspectives 97-118 DOI: https://doi.org/10.1257/jep.9.4.97

Princen SBM The California Effect in the Transatlantic Relationship (PhD-dissertation Utrecht University 2002)

Revesz R "Rehabilitating Interstate Competition: Rethinking the Race-for-the-Bottom Rationale for Federal Environmental Regulation" 1992 NYU L Rev 1210-1254

Revesz R "Federalism and Interstate Environmental Externalities" 1996 U Pa L Rev 2341-2416 DOI: https://doi.org/10.2307/3312672

Revesz R "Federalism and Environmental Regulation: An Overview" in Revesz R, Sands Ph and Stewart R (eds) Environmental Law: The Economy and Sustainable Development (Cambridge University Press Cambridge 2000) 37-79 DOI: https://doi.org/10.1017/CBO9780511720871.002

Rojec M and Damijan J "Relocation via Foreign Direct Investment from Old to New EU Member States: Scale and Structural Dimension of the Process" 2008 Structural Change and Economic Dynamics 53-65 DOI: https://doi.org/10.1016/j.strueco.2007.11.005

Rose-Ackerman S Re-thinking the Progressive Agenda: The Reform of the American Regulatory State (The Free Press New York 1992)

Shen G Regulation of Cross-Border Establishment in China and the EU: A Comparative Law and Economics Approach (Intersentia Antwerp 2016) DOI: https://doi.org/10.1017/9781780685410

Siems M "Measuring the Unmeasurable: How to Turn Law into Numbers" in Faure M and Smits J (eds) Does Law Matter? On Law and Economic Growth (Intersentia Antwerp 2011) 115-136

Tiebout C "A Pure Theory of Local Expenditures" 1956 Journal of Political Economy 416-424 DOI: https://doi.org/10.1086/257839

Van den Bergh R "Subsidiarity as an Economic Demarcation Principle and the Emergence of European Private Law" 1998 MJECL 129-152 DOI: https://doi.org/10.1177/1023263X9800500203

Van den Bergh R, Faure MG and Lefevere J "The Subsidiarity Principle in European Environmental Law: An Economic Analysis" in Eide E and Van den Bergh R (eds) Law and Economics of the Environment (Juridisk Forlag Oslo 1996) 121-166

Vogel D "Environmental Regulation and Economic Integration" in Esty DC and Geradin D (eds) Regulatory Competition and Economic Integration: Comparative Perspectives (Oxford University Press Oxford 2001) 337-347 DOI: https://doi.org/10.1093/oso/9780198299059.003.0015

Xu G "The Role of Law in Economic Growth: A Literature Review" 2011 Journal of Economic Surveys 833-871 DOI: https://doi.org/10.1111/j.1467-6419.2011.00691.x

Internet sources

Council Directive 76/464/EEC of 4 May 1976 on pollution caused by certain dangerous substances discharged into the aquatic environment of the Community, OJ L128 18.5.1976, p. 23-29, available on https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A31976L0464

Divanbeigi R and Ramalho R 2015 Business Regulations and Growth. Policy Research Working Paper No 7299 https://openknowledge. DOI: https://doi.org/10.1596/1813-9450-7299

worldbank.org/handle/10986/22172 accessed 11 June 2023

Hallward-Driemeier M and Pritchett L 2011 How Business is Done and the 'Doing Business' Indicators: The Investment Climate when Firms have Climate Control. Policy Research Working Paper No WPS 5563 http://hdl.handle.net/10986/3330 accessed 11 June 2023 DOI: https://doi.org/10.1596/1813-9450-5563

Klapper L and Delgado J "Entrepreneurship: New Data on Business Creation and How to Promote It. Note No 316 https://openknowledge.worldbank.org/handle/10986/11163 accessed 11 June 2023

Klapper L and Love I 2010 New Firm Creation. Viewpoint No 324 https://openknowledge.worldbank.org/handle/10986/11078 accessed 11 June 2023

Klapper L, Laeven L and Rajan R 2004 Business Environment and Firm Entry: Evidence from International Data, Policy Research. Working Paper No 3232 https://openknowledge.worldbank.org/handle/10986/14724 accessed 11 June 2023 DOI: https://doi.org/10.1596/1813-9450-3232

Panayotou T 1995 Economic Instruments for Environmental Management in Developing Countries https://wedocs.unep.org/handle/

500.11822/28543 accessed 11 June 2023

Strand J 2002 Environmental Kuznets Curves: Empirical Relationships between Environmental Quality and Economic Development: Memorandum No 04/2002 https://www.sv.uio.no/econ/english/research/Memoranda/

working-papers/pdf-files/2002/Memo-04-2002.pdf accessed 11 June 2023

Van Zeben J 2012 Regulatory Competence Allocation: The Missing Link in Theories of Federalism https://economix.fr/uploads/source/doc/seminaires/

lien/Van-Zeben.pdf accessed 11 June 2023

World Bank Group 2016 Doing Business Regional Profile 2016: Landlocked Economies https://openknowledge.worldbank.org/handle/10986/23862 accessed 11 June 2023

Published

23-11-2023

Issue

Section

Special Edition: Environmental & Energy Law

How to Cite

Faure, M. (2023). The Impact of Environmental Regulation on the Investment Climate. Potchefstroom Electronic Law Journal, 26, (Published on 23 November 2023) pp 1 - 31. https://doi.org/10.17159/1727-3781/2023/v26i0a16378

Similar Articles

91-100 of 1087

You may also start an advanced similarity search for this article.