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Economic impacts of environmental regulations

Author

Listed:
  • Tilmann Rave
  • Ursula Triebswetter

Abstract

This study was commissioned by the German Environmental Protection Agency and also informs the project "New techniques for integrated, cross-media environmental protection" of the German ministry of education and research. The background of the study is the Directive 96/61/EG on integrated pollution prevention and control (IPPC-Directive) which serves as an important instrument of the European Union to gradually harmonise permitting procedures and conditions of large industrial installations in the Member States. The Directive aims to consider impacts of industrial plants on the environment as a whole and across environmental media, like air pollution, water pollution, soil contamination, generation of waste, resource use, noise and implications on energy efficiency and risk management. Emission limits defined in the permits are supposed to be based on "Best Available Techniques" (BAT). Integrated permitting is not only expected to lead to environmental improvements, but will also have economic impacts. This includes a cost burden for some of the companies directly affected by IPPC requirements, but may also include wider economic effects on the meso or even the macro level, e.g. via the stimulation of demand, innovation incentives or implications on competitiveness. The study has to be seen as a feasibility study and focuses primarily on conceptual and methodological issues without undertaking any calculations or other direct impact assessments. It aims to give recommendations on the design of potential future studies (in particular with regard to the above mentioned "wider effects"). The results demonstrate that the quantification of the numerous possible economic effects poses a great challenge for empirical research. Yet, a number of established and new economic methods may be used for this purpose (e.g. extended input-output-models, micro- and spatial-econometric methods, micro-simulation models). A gradual, co-ordinated, modular and multi-annual study design is suggested.

Suggested Citation

  • Tilmann Rave & Ursula Triebswetter, 2006. "Economic impacts of environmental regulations," ifo Forschungsberichte, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 30.
    • Handle: RePEc:ces:ifofob:30
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    More about this item

    JEL classification:

    • L50 - Industrial Organization - - Regulation and Industrial Policy - - - General
    • Q20 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - General

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