Environmental Policies and Industrial Competitiveness: The choice of instrument

The empirical literature on the international competitiveness effects of environmental policy is large and expanding. However, there are few studies which actually look at the competitiveness effects of different types of regulation. This is significant since the economic effects of a regulation may be more a function of its nature in an institutional sense than its stringency in terms of emissions abated. In this paper some of these issues are explored, looking at the effects of different direct forms of regulation (mandated emission reductions and technology-based standards) and market-based instruments (emission taxes and tradeable permits) on competitiveness.