The Costs of Environmental Standards

Compliance to environmental standards potentially entails a number of substantial costs. It can happen that firms operating in a country with stricter environmental regulations can lose their comparative advantage in international markets. This may lead to the relocation of dirtier industries to destination countries of a looser environmental regulatory framework. And, are there also hidden indirect costs which should also be taken into consideration? Are environmental standards always detrimental to the competitiveness of firms? Here, we will try to seek answers to all these (and other) questions by looking at economic theories underpinning environmental standards, as well as by making reference to results coming from case studies and quantitative analyses.