Green laws cost neutral

7th April 2016

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Countries with tough environmental regulations do not lose export competitiveness to those with less stringent legislation, according to the OECD.

The Paris-based organisation, which represents the world’s major economies, found that high-polluting or energy-intensive industries, whether in the BRIICS (Brazil, Russia, India, Indonesia, China, South Africa) or in Europe or North America, would suffer a small disadvantage from a further tightening of regulations, but that growth in exports from less-polluting activities would compensate.

‘Environmental policies are simply not the major driver of international trade patterns,’ said OECD chief economist Catherine Mann. ‘We found no evidence that a large gap between the environmental policies of two given countries significantly affects their overall trade in manufactured goods.’

The organisation's study used historical export data to calculate the domestic added value from high- and low-polluting industries in 23 advanced countries and six emerging economies. The OECD’s environmental policy indicator ranked countries according to more or less stringent policies. The analysis showed that countries with strict environmental laws suffer a very small disadvantage in pollution-intensive sectors, such as steelmaking, chemicals and plastics, but a gain in cleaner industries like machinery or electronics.

The domestic value added in exports of goods from high-polluting industries in the most environmentally stringent countries (Denmark, Germany and Switzerland) compared with the BRIICS increased by $11.15bn between 1995 and 2008 – 3% less than if the laws were not as strict. However, the laws protecting the environment boosted exports in cleaner industries by 3%, almost the same amount in dollars.


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