From sulphur emissions standards to the minimum wage, there has always been fierce debate about the impact of regulation on competitiveness. Recently, initiatives like the Prime Minister’s Panel for Regulatory Accountability and the EU’s new Competitiveness Council have put the political spotlight on regulation and its effects. Debates about environmental regulation often come down to issues of competitiveness and costs of compliance. The arguments on both sides are well-rehearsed. Industry lobby groups tend to say that badly-designed or overly burdensome regulation hinders competitiveness by driving up costs and bureaucracy. The environmental lobby responds by saying that regulation can drive competitiveness, because eco-efficient companies are more competitive, because regulation drives innovation, or because it gives a boost to environmental industries. It is very difficult to sustain either of these positions. The reality, as this paper shows, is somewhat more nuanced.
