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Do Corporate Environmental Contributions Justify the Public Interest Defence?

Author

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  • Nigar Hashimzade

    (Durham University and CESifo)

  • Gareth Myles

    (University of Adelaide, Institute for Fiscal Studies, and CESifo)

Abstract

Corporations make significant direct contributions to environmental improvement and also indirect contributions, through expenditure on process and product innovation. Environmental protection is a public good and so may be under-supplied in a competitive environment. European law requires competition authorities to consider public interest arguments. The public interest defence for allowing a cartel to operate is based on the argument that the additional profitability induces cartel members to make greater environmental contributions that more than offset the welfare loss due to non-competitive pricing. We explore profit-seeking motivations for the corporate environmental expenditures, leaving aside corporate social responsibility concerns. Two motives are considered: environmental improvement leading to reduced production costs, and publicized environmental expenditures boosting brand image. Allowing the operational firms to form a cartel and raise prices above Nash equilibrium levels always reduces environmental quality and consumer welfare. As a consequence, we find no support for the public interest defence.

Suggested Citation

  • Nigar Hashimzade & Gareth Myles, 2018. "Do Corporate Environmental Contributions Justify the Public Interest Defence?," School of Economics and Public Policy Working Papers 2018-07, University of Adelaide, School of Economics and Public Policy.
    • Handle: RePEc:adl:wpaper:2018-07
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    References listed on IDEAS

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    Cited by:

    1. Maxime Charreire & Eric Langlais, 2021. "Should environment be a concern for competition policy when firms face environmental liability ?," Post-Print hal-03208691, HAL.
    2. Mariana Cunha & Filipa Mota, 2020. "Coordinated Effects of Corporate Social Responsibility," Journal of Industry, Competition and Trade, Springer, vol. 20(4), pages 617-641, December.
    3. Charreire, Maxime & Langlais, Eric, 2021. "Should environment be a concern for competition policy when firms face environmental liability?," International Review of Law and Economics, Elsevier, vol. 67(C).
    4. Eric Langlais & Maxime Charreire, 2020. "Should environment be a concern for competition policy when firms face environmental liability ?," EconomiX Working Papers 2020-25, University of Paris Nanterre, EconomiX.

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    More about this item

    JEL classification:

    • L49 - Industrial Organization - - Antitrust Issues and Policies - - - Other
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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