Dura lex sed lex: why implementation gaps in environmental policy matter?

We investigate implementation gaps observed in environmental regulations in the specific case of dangerous chemical substances such as targeted by the REACH regulation. An agent-based model is developed as an exploratory tool to examine to what extent significant implementation gaps between stringency requirements and real but conditional enforcement jeopardize the transition to safer substitutes, by affecting the way heterogeneous actors perceive the regulatory threat and their innovation strategy. We show that the combination of the most severe regulation with the strictest enforcement and the shortest timing would not necessarily lead to the highest frequency of bans on dangerous substances, because it may alter the competitive process that is vital to preserving diversity in innovation strategies and to developing safer substitutes. Opting for a very severe regulation should be combined with concessions on enforcement in order to preserve diversity and to give green 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 release the degree of stringency in order to enhance the prospects of transition to safer substitutes.