Competitiveness of Nations and Environmental Protection

Abstract

In 1972 two groundbreaking publications addressed the relationship between the level of environmental protection and competitiveness of nations: In “Limits to Growth”, Meadows et al. analyze industrialization, population growth, malnutrition, use of non-renewable resources and environmental pollution. After developing a set of scenarios, they concluded that limits to economic growth would be reached within 100 years if economic activities did not change dramatically (Meadows/Meadows/Randers et al., 1972). Commoner developed the Environmental Impact Index, which casts population, affluence and technology as the main drivers for environmental impact (Commoner, 1972). Triggered by these publications, a public discussion on the question: “Are environmental protection and competitiveness really incompatible?” started. In the 1990s, Porter and van der Linde gave new insight to this discussion by establishing the hypothesis that environmental protection might not merely exacerbate but indeed stimulate the competitiveness of industries (Porter/van der Linde, 1995a). Two rival research streams emerged, one attempting to prove the so-called “Porter-hypothesis”, the other seeking to rebut it. To date, no satisfying conclusion has been reached. In the light of the 2008 financial crisis, the discussion has gained in importance both for industries and nations (de Boer, 2008).In order to determine the relationship between the competitiveness of nations and environmental protection, we first analyze and synthesize the existing literature on the theoretical discussion of the two components. In the second part of this paper, we extract hypotheses from the existing literature about the relationship between the two concepts. Thirdly, we analyze 65 empirical studies researching the relationships among the components of the concepts with the vote-counting method. Based on this assessment we test our hypotheses and conclusions.