Edited by Nick Johnstone
Chapter 1: Public Environmental Policy and Corporate Behaviour: Project Background, Overview of the Data and Summary Results
Nick Johnstone, Céline Serravalle, Pascale Scapecchi and Julien Labonne I. INTRODUCTION Much of the economic analysis of environmental policy can be summarized under two principles: (1) many aspects of the natural environment are public goods, and as such private economic agents will not behave in a manner which is consistent with social welfare maximization in the absence of public intervention; and (2) the use of market-based instruments is a more economically eﬃcient means of achieving a given environmental objective since they encourage an eﬃcient allocation of resources and eﬀort and provide stronger dynamic incentives for environmentally beneﬁcial technological innovation. However, the treatment of the inner workings of the ﬁrm is largely absent from the vast body of literature in support of these two principles. Nonetheless, recent work (DeCanio 1998; Gabel and Sinclair-Desgagné 2001) has highlighted the importance of an understanding of the ﬁrm’s commercial motivations, decision-making procedures and organizational structure when designing and implementing public environmental policies. Issues such as the allocation of responsibilities for environmental matters within the ﬁrm, the use of diﬀerent accounting and investment appraisal procedures, the implementation of environmental management systems, and other managerial responses are likely to aﬀect how ﬁrms respond to diﬀerent environmental policy measures. As Stiglitz (1991) has pointed out, ‘most production in modern economies occurs within organisations, and this production is regulated only to a limited extent by prices . . . These observations make it clear that if economists wish to understand how resources in modern...
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