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Measuring Environmental Policy Stringency: Approaches, Validity, and Impact on Energy Efficiency

Listed author(s):
  • Marzio Galeotti

    (Università degli studi di Milano, Centro Studi Luca D’Agliano, and IEFE-Bocconi)

  • Silvia Salini

    (Università degli Studi di Milano)

  • Elena Verdolini

    (Fondazione Eni Enrico Mattei and CMCC)

Proponents of the green growth strategy worldwide hold that reductions of harmful greenhouse gas emissions through environmental policy can be pursued together with increased growth and can result in higher competitiveness. Solid tests of this theory are impaired by the lack of appropriate empirical proxies for the commitment to, and stringency of, environmental policy. We contribute to the literature by: (1) computing different indicators of environmental policy stringency, both previously used in the literature and novel, (2) testing to what extent they convey similar insights through a comparison exercise, and (3) showing the implications of using one or the other methodology in an empirical application testing whether countries with more stringent environmental and energy policy have indeed shown historically higher degree of energy efficiency. The application is cast in an Energy Kuznets Curve framework. The analysis quite naturally carries over to the role of, more generally, economic policy.

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Paper provided by Centro Studi Luca d'Agliano, University of Milano in its series Development Working Papers with number 412.

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Date of creation: 21 Feb 2017
Date of revision: 21 Feb 2017
Handle: RePEc:csl:devewp:412
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  1. Nesta, Lionel & Vona, Francesco & Nicolli, Francesco, 2014. "Environmental policies, competition and innovation in renewable energy," Journal of Environmental Economics and Management, Elsevier, vol. 67(3), pages 396-411.
  2. Francesco Nicolli & Francesco Vona, 2012. "The evolution of renewable energy policy in Oecd countries:aggregate indicators and determinants," Documents de Travail de l'OFCE 2012-13, Observatoire Francais des Conjonctures Economiques (OFCE).
  3. Stefan Ambec & Mark A. Cohen & Stewart Elgie & Paul Lanoie, 2013. "The Porter Hypothesis at 20: Can Environmental Regulation Enhance Innovation and Competitiveness?," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 7(1), pages 2-22, January.
  4. Claire Brunel & Arik Levinson, 2013. "Measuring Environmental Regulatory Stringency," OECD Trade and Environment Working Papers 2013/5, OECD Publishing.
  5. Adam B. Jaffe & Karen Palmer, 1997. "Environmental Regulation And Innovation: A Panel Data Study," The Review of Economics and Statistics, MIT Press, vol. 79(4), pages 610-619, November.
  6. Matthew A. Cole & Robert J. R. Elliott, 2003. "Do Environmental Regulations Influence Trade Patterns? Testing Old and New Trade Theories," The World Economy, Wiley Blackwell, vol. 26(8), pages 1163-1186, August.
  7. Arik Levinson & M. Scott Taylor, 2008. "Unmasking The Pollution Haven Effect," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 49(1), pages 223-254, 02.
  8. Rubashkina, Yana & Galeotti, Marzio & Verdolini, Elena, 2015. "Environmental regulation and competitiveness: Empirical evidence on the Porter Hypothesis from European manufacturing sectors," Energy Policy, Elsevier, vol. 83(C), pages 288-300.
  9. Paul Lanoie & Jérémy Laurent‐Lucchetti & Nick Johnstone & Stefan Ambec, 2011. "Environmental Policy, Innovation and Performance: New Insights on the Porter Hypothesis," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 20(3), pages 803-842, 09.
  10. Suri, Vivek & Chapman, Duane, 1998. "Economic growth, trade and energy: implications for the environmental Kuznets curve," Ecological Economics, Elsevier, vol. 25(2), pages 195-208, May.
  11. Marzio Galeotti & Yana Rubashkina & Silvia Salini & Elena Verdolini, 2014. "Environmental Policy Performance and its Determinants: Application of a Three-level Random Intercept Model," Working Papers 2014.90, Fondazione Eni Enrico Mattei.
  12. Ruth A. Judson & Richard Schmalensee & Thomas M. Stoker, 1999. "Economic Development and the Structure of the Demand for Commercial Energy," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 29-57.
  13. M A Cole & R J R Elliott, 2003. "Do Environmental Regulations Influence Trade Patterns? Testing New and Old Trade Theories," The School of Economics Discussion Paper Series 0310, Economics, The University of Manchester.
  14. Tobey, James A, 1990. "The Effects of Domestic Environmental Policies on Patterns of World Trade: An Empirical Test," Kyklos, Wiley Blackwell, vol. 43(2), pages 191-209.
  15. Fischer, Carolyn & Newell, Richard G., 2008. "Environmental and technology policies for climate mitigation," Journal of Environmental Economics and Management, Elsevier, vol. 55(2), pages 142-162, March.
  16. Galeotti, Marzio & Lanza, Alessandro & Pauli, Francesco, 2006. "Reassessing the environmental Kuznets curve for CO2 emissions: A robustness exercise," Ecological Economics, Elsevier, vol. 57(1), pages 152-163, April.
  17. Agras, Jean & Chapman, Duane, 1999. "A dynamic approach to the Environmental Kuznets Curve hypothesis," Ecological Economics, Elsevier, vol. 28(2), pages 267-277, February.
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