Firms in (a) Greener Economy

The proposed project addresses the growing importance of stringent environmental regulations as tools to mitigate greenhouse gas (GHG) emissions and improve environmental performance. While there is broad consensus on the need for decarbonization, the economic impact and effectiveness of these policies remain debated. Building on Nunez-Rocha & Silberberger (2021), this project will develop environmental stringency indicators using legal documents from FAOLEX and ECOLEX, focusing on Germany and France. These countries, with distinct energy approaches—Germany favoring renewables and France prioritizing nuclear energy—provide a unique basis for comparative analysis, both operating under EU regulations. The first objective (O1) is to create indicators of environmental regulation stringency for Germany and France. This will enable an in-depth assessment of how stricter regulations impact firms and will also evaluate the effectiveness of these regulations in enhancing environmental performance. The second objective (O2) explores the effect of environmental regulations on trade, focusing on how stricter policies impact imports, exports, and the comparative advantage of firms. The research will investigate the existence of a Pollution Haven Effect, where stricter regulations may push industries to relocate abroad. The third objective (O3) examines the impact of regulatory stringency on firm productivity, considering both short-term compliance costs and long-term innovation gains. This analysis will explore how different industries respond to regulations and whether innovation offsets potential productivity losses. The project aims to provide policy recommendations to design regulations that balance environmental protection with economic stability, enhancing environmental performance without displacing pollution or harming productivity.