Low-carbon growth for Indian iron and steel sector: exploring the role of voluntary environmental compliance

Abstract

India's move towards low-carbon growth will be successful only when the industries assume responsibilities of climate change. Previous studies argue that voluntary compliance by firms being business-led initiative is appropriate for developing nations, however provides little empirical evidence. The present study investigates the role of voluntary compliance in improving firms’ environmental performance in Indian iron and steel sector using sample of 76 firms over years 2006–07 to 2011–12. Environmental performance is measured by CO2 emissions. In absence of emission data at firm level, we quantify CO2 emissions from energy consumption using Intergovernmental Panel on Climate Change (IPCC) reference approach. Voluntary compliance is indicated by presence of voluntary environmental management standards - ISO 14001. The study finds that 33% of sample firms comply with ISO 14001. Further, the empirical results based on panel data econometric suggests that there is a significant positive relationship between voluntary compliance and improvement in environmental performance, even after addressing simultaneity issues and including other firm characteristics. Thus, voluntary compliance may be used as supplementary policy tool to achieve low carbon growth in industries. Additionally, there is a need to disseminate information about ISO 14001 by government as well as firms to create awareness.