Mind the gap: Investigating the impact of implementation gaps on cleaner technology transition

Environmental regulation is an important part of many policy mixes for sustainability transitions. However, due to factors including lobbying actions, uncertainty about technological possibilities and costs, there often exists an implementation gap between the regulation and its enforcement. The paper presents an agent-based model to investigate the effect of such implementation gaps on the transition to sustainability for the REACH regulation on dangerous chemical substances. By affecting both the way that heterogeneous actors perceive the regulatory threat and their innovation strategy, implementation gaps may jeopardize the transition to safer substitutes. We show that the combination of the most severe regulation with the strictest enforcement and the shortest timing does not necessarily lead to the highest frequency of bans on dangerous substances, because it may place too much pressure on pioneering firms developing safer substitutes. Opting for a severe regulation should be combined with concessions on enforcement in order to preserve competition and to give pioneering competitors enough time to expand. From a reverse angle, if authorities are keen to apply the regulation strictly, and are prepared to face higher market concentration, then they should relax the degree of stringency in order to enhance the prospects of transition to safer substitutes.