Effect of Environmental Regulation Stringency on the Pulp and Paper Industry

Johan Brolund and Robert Lundmark
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Johan Brolund: ETS/Economics Unit, Luleå University of Technology, SE-971 87 Luleå, Sweden
Robert Lundmark: ETS/Economics Unit, Luleå University of Technology, SE-971 87 Luleå, Sweden

Sustainability, 2017, vol. 9, issue 12, 1-16

Abstract: The article investigates whether environmental regulations have affected productivity development and technological change in the European pulp and paper industry. A dynamic panel data approach is selected for analyzing a sample consisting of the pulp and paper industries in eight European countries. Industry total factor productivity for the period 1993–2009 is used as the dependent variable; it is explained by the intensities of environmental regulations for various types of pollutants, as well as by a number of other independent variables. The econometric results indicate that the regulation of nitrogen oxides is associated with productivity improvements with a one-year lag, whereas regulations regarding sulphur dioxide and carbon dioxide have not had any statistically significant impact. In line with the a priori expectations, the price of pulp is connected to a negative effect, while lagged R&D expenditures have had corresponding positive impacts. However, since stationary tests are asymptotic and the data series are quite short, strong conclusions regarding the actual causal effect of environmental policy could not be drawn. The results could therefore not be viewed as a proof of the so-called strong Porter hypothesis postulating that stringent well-designed environmental regulations increase productivity growth compared to a no-policy scenario.

Keywords: environmental regulation; sustainability; productivity; cross-country; Europe; pulp and paper industry (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:gam:jsusta:v:9:y:2017:i:12:p:2323-:d:122721

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