Environmental Policy and Corporate Behaviour

Environmental Policy and Corporate Behaviour

Edited by Nick Johnstone

For the last 30 years, analysis of the inner workings of the firm has been largely absent from economic assessments of environmental policy. Recent work has highlighted the importance of understanding a firm’s commercial motivations, decision-making procedures and organizational structure when designing and implementing public environmental policies. Environmental Policy and Corporate Behaviour responds to this need, investigating the many internal challenges faced by firms seeking to implement new policies and achieve significant and long-lasting environmental progress.

Chapter 5: End-of-Pipe or Cleaner Production? An Empirical Comparison of Environmental Innovation Decisions Across OECD Countries

Manuel Frondel, Jens Horbach and Klaus Rennings

Subjects: business and management, management and sustainability, economics and finance, environmental economics, public sector economics, environment, environmental economics, environmental management


Manuel Frondel, Jens Horbach and Klaus Rennings I. INTRODUCTION Typically, we distinguish between two different types of environmental investments that mitigate the environmental burden of production: cleaner production and end-of-pipe technologies. Cleaner production reduces resource use and/or pollution at source by using cleaner inputs and production methods directly within the production process, whereas end-of-pipe technologies curb pollution emissions by implementing add-on measures. Thus, cleaner production technologies are frequently seen as being superior to end-of-pipe technologies for both environmental and economic reasons. Investment in cleaner production technologies, however, is often hampered by barriers such as additional requirements for coordination and a lack of organizational support within firms. In addition to substantial investment costs in new technologies, additional obstacles arise due to the nature of the environmental problem and the type of regulations involved. Command-and-control (CaC) regulations, for instance, frequently entail technology standards that can only be met through end-of-pipe abatement measures. With respect to the diffusion of cleaner production, the question arises as to which one of several alternative policy approaches is to be preferred: technology-based standards, voluntary measures, or economic instruments, which leave decisions about the appropriate abatement technology up to the firm? There has been exceptionally little empirical analysis directed at the diffusion of specific types of environmental technologies, principally because of the paucity of available data (Brunnermeier and Cohen 2003; Jaffe et al. 2002). In particular, it is still unclear to what extent and why firms may shift 174 An empirical comparison of...

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