IDEAS home Printed from https://ideas.repec.org/p/ece/annrep/2008_7.html
   My bibliography  Save this paper

Environmental Policy and International Competitiveness in a Globalizing World: Challenges for Low-Income Countries in the UNECE Region

Author

Listed:
  • Dieter Hesse

    (United Nations Economic Commission for Europe)

Abstract

This paper addresses a set of conflicting national objectives, that between economic competitiveness and environmental quality. In lower-income economies, the perceived benefits of improved environmental quality may be valued less than in richer economies while the perceived opportunity costs of abatement or compliance may be valued higher especially when they impact employment levels or result in lower wages and profits. There is also the fear that more stringent standards might negatively impact foreign investment as multinationals seek out locations where operating costs are low. As such, these countries are therefore quite concerned about mandating environmental regulations that could impose significant costs on their enterprises and thereby reduce their global competitiveness. In addition there is a free rider problem regarding transboundary pollution as a country can benefit from the higher environmental standards negotiated amongst its neighbours while avoiding all the costs by deciding not to participate themselves. This paper examines environmental policy in the former transition economies. In these countries environmental institutions, especially the government ministries, are weak, regulations are often inadequate, and enforcement efforts need to be improved. At the same time these economies attach a high priority to increasing living standards and view that this can only be achieved by increasing their global competitiveness in a number of non-traditional industries. Nevertheless it is argued that high environmental standards are only a minor factor in determining cost competitiveness for most industries and locational decisions for multinationals. Even to the degree that they might be a competitive disadvantage in the short-run, they can actually turn out to be an advantage in the longer-term as they promote technological upgrading, the efficient use of resources, and can reduce adjustment costs involved with future trade policy initiatives or integration into production-sharing networks. In addition there are other benefits external to the firm including improved public health, increased tourism and additional recreational resources. Furthermore, the costs of undoing degradation, which will be desired at some future date as national incomes rise, can be avoided altogether. Thus in essence, when these dynamic factors are combined with the social benefits, the real costs of setting high environmental standards are much less than what their current costs might suggest.

Suggested Citation

  • Dieter Hesse, 2008. "Environmental Policy and International Competitiveness in a Globalizing World: Challenges for Low-Income Countries in the UNECE Region," UNECE Annual Report Economic Essays 2008_7, UNECE.
  • Handle: RePEc:ece:annrep:2008_7
    as

    Download full text from publisher

    File URL: http://www.unece.org/fileadmin/DAM/oes/nutshell/2008/7_Env_Policy_International_Competitivenes.pdf
    File Function: First version, 2008
    Download Restriction: no

    More about this item

    Keywords

    competitiveness; Europe; transition economies; environmental policy; climate change; sustainable development;

    JEL classification:

    • K32 - Law and Economics - - Other Substantive Areas of Law - - - Energy, Environmental, Health, and Safety Law
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • H87 - Public Economics - - Miscellaneous Issues - - - International Fiscal Issues; International Public Goods
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ece:annrep:2008_7. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Robert Shelburne). General contact details of provider: http://edirc.repec.org/data/eceunch.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.