The Effect of Environmental Regulations on Industrial Competitiveness of Selected Industries in Developing Countries

THIS PAPER EXAMINES the potential cost impact of increasingly stringent environmental regulations on the costs of industrial production. It first estimates the costs of compliance with environmental regulation from a macro (industry-wide) perspective, and it finds the magnitude of the costs to be small in comparison to the costs of production. The fragmentary micro (firmlevel) data that is available from developing countries suggest that the cost impact varies depending on several factors discussed here. The limited data available indicates that more empirical work is needed in this field in order to clarify the extent to which environmental regulations will affect the costs of industrial production. This type of information is required not only to address the concerns of those who claim that environmental regulations will have a significant cost impact, but also to design policies to assist those industrial subsectors and small-scale industries that may encounter difficulties in achieving compliance with environmental regulations.