A literature review on the links between environmental regulation and competitiveness

The effects of environmental regulation on competitiveness are under constant debate for policy‐makers and practitioners. The following article reviews the different ways of defining and measuring the effects of environmental regulation on competition and market forces and synthesizes the most recent findings on the relationship between these dimensions. We find that two variables have proved to be both (1) key in defining to what extent and under what conditions environmental regulation exerts adverse or positive effects on competitiveness, and (2) difficult to nail down: forms of regulation and responses by business. The form of regulation may be as important as its stringency in determining the nature of its relationship with competitiveness. The relationship between environmental policies, environmental performance and competitiveness may also vary depending on the characteristics of the businesses and sectors concerned. Taking these factors in the methods of assessment into account may be crucial in understanding the nature of the relationship between environmental regulation and competitiveness.