How much does environmental regulation really cost the industrial sector? However heated the debates regarding this issue may have been, surprisingly little evidence is available to document this question. The brief first gathers evidence pointing to chronic over-estimation of environmental costs, then provides materials suggesting that environmental costs have had limited impacts on US or European industry, and ends by examining to what extent environmental standardization proved beneficial.

Key messages

  • In cases where the impact of European environmental policies on industries were studied, results suggest that stricter environmental regulations did not necessarily lead to higher environmental expenditures in fine.
  • Most often, environmental protection expenditures accounted only for about 2% to 3% of total value added generated by industrial sectors, and were progressively reduced over time.
  • Conversely, some studies have highlighted a number of benefits that can be derived from environmental initiatives, such as savings in materials or the reduction of depollution costs.
  • However, no evidence supports the extreme opposite, i.e. wide-scale positive impact on the regulated companies, except on specific cases.
  • The economic argument in favor of environmental regulation is thus relevant, but with a limited evidence basis, and would be strengthened if research had been more systematically and broadly produced to study all sectors of the economy over a longer period of time. This could be a relevant topic to be supported by the European research agenda.
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