Environmental Compliance Costs Research Articles

Does Government Environmental Concern Affect Enterprise Sustainable Development? Evidence from China

As the executor and agent of China’s environmental policy, local governments’ environmental concern reflects local governments’ determination in environmental governance. To figure out how the strengthening environmental concerns affect enterprises’ long-term activities, this study focuses on pharmaceutical manufacturing enterprises due to the enormous and complex composition of emissions. We apply bag of words to summarize relevant environmental words from the annual work reports in local governments to measure environmental concern. The empirical results of the OLS method reveal that the increasing environmental concerns of local governments did decrease the growth rate of chemical oxygen demand (COD) emission authentically. At the same time, it will inhibit the research and experimental development (R&D) activity intensity, but promote production efficiency of pharmaceutical manufacturing enterprises. After that, we discuss the heterogeneity of enterprise ownership, corporate social responsibility and regional regulatory strength of enterprises. Overall, we conclude that environmental concern did reduce COD emission and promote production efficiency, but it also has negative spillover effects. The novel contribution of this paper is that it enriches the trade-off between strengthening environmental compliance costs and long-term production and innovation activities. These results indicate that pharmaceutical manufacturing enterprises prioritize optimizing existing production processes instead of adopting efficient technology when complying with stricter environmental regulation. The reduction of R&D activities may pose risks to the long-term sustainable development of enterprises.

Digitalization and Automation and AI: A Theoretical Framework of rethinking the Pollution Haven Hypothesis

This theoretical paper investigates the impact of digitalization, automation, and artificial intelligence (AI) on environmental regulations, specifically through the lens of the Pollution Haven Hypothesis (PHH). It explores how these advancements influence pollution intensity and environmental compliance costs, challenging the traditional understanding of the PHH. Methodology. The study employs a Cobb-Douglas production function to model the relationship between technological innovations and environmental regulations. By integrating digitalization, automation, and AI into the model, the paper examines how these factors affect the economic incentives for firms to relocate to regions with lenient environmental standards. Findings. The analysis reveals that advancements in digitalization and automation reduce pollution intensity and lower the costs of complying with strict environmental standards. As a result, the economic incentive to relocate to pollution havens diminishes. In an open economy, the combination of stringent environmental policies and technological innovations leads to reduced pollution levels and a shift toward cleaner production processes. Practical Implication. The findings suggest that integrating technological innovations into environmental policy can make adherence to stricter regulations more economically viable, thereby weakening the appeal of pollution havens. This has significant implications for global sustainability efforts, as it highlights the potential for technology to support more effective and equitable environmental regulations. Originality. This study introduces a novel perspective by directly linking technological innovations to shifts in capital allocation and the efficacy of environmental policies. It offers a fresh understanding of the PHH in the context of modern advancements, providing new understanding into the relationship between innovation and environmental regulation.

Towards a Sustainable Future: Examining the Symmetric and Asymmetric Effect of Unstable Macroeconomic Factors on Initial Public Offerings Variability

The research seeks to explore the symmetric and asymmetric effects of renewable energy, technological innovation, and ecological footprint on the variability of initial public offerings in the unique institutional setting of the Pakistani IPO market. The study used yearly data on the Pakistani IPO market and the macroeconomic variables from January 1992 to December 2020. Further, the study employed the linear and Non-Linear ARDL to investigate the symmetric and asymmetric nexus among variables. For that purpose, the stationarity of the variables was predetermined using Augmented Dicker Fuller (ADF) and Phillips Perron (PP) unit root tests. Additionally, the F-bound test verifies that IPO issuance and macroeconomic drivers are co-integrated. The findings show a symmetric and asymmetric relationship between IPO variability and macroeconomic variables under study. Renewable energy and technological innovation have statistically positive effects on IPO variability. On the contrary, the ecological footprint has a significantly negative impact on IPO variability. The weak condition of the Pakistani IPO market could be attributed to the slow adoption of technological innovation, the transition to renewable energy, and a high ecological footprint that attracts stringent regulatory and environmental compliance costs of going public.

EFFECT OF ENVIRONMENTAL ACCOUNTING ON FINANCIAL PERFORMANCE OF QUOTED DEPOSIT MONEY BANKS IN NIGERIA

This study investigates the impact of environmental accounting on the financial performance of quoted deposit money banks in Nigeria. The sample consisted of 14 banks, which were selected using census sampling techniques. A random effect regression model was used to test the hypotheses after conducting diagnostic tests. The results indicate that environmental conservative cost disclosure has a significant positive effect on return on assets, while environmental compliance cost disclosure has an insignificant positive effect on return on assets. Additionally, community development cost disclosure has an insignificant negative effect on return on assets. The study suggests that deposit money banks in Nigeria should prioritize environmental conservative cost disclosure in their financial reporting and continue to comply with environmental regulations by disclosing their environmental compliance costs to improve their financial performance. In summary, the lack of clarity on environmental accounting practices can lead to information gaps for responsible financiers and investors. The study recommends specific actions for Nigerian banks to enhance their sustainability reporting and ultimately improve their financial performance.

Unlocking the double-dividend: Evaluating the impact of SO₂ emissions trading scheme on firm's environmental and economic performance

The optimal design of environmental instruments demands a balance between environmental enhancement and economic growth. Utilizing microdata from the China Environmental Statistics Database and the China Industrial Firm Database, this study employs the difference-in-differences (DD) methodology to explore the dual effects of the SO₂ Emissions Trading Scheme (ETS) on the environmental and economic performance of micro-firms. The findings suggest that: (1) The SO₂ ETS not only induces emission reduction effects among firms in pilot areas but also improves their industrial added value. (2) The SO₂ ETS exhibits heterogeneous impacts across firms of diverse ownership, export status, and size. (3) While the SO₂ ETS prompts firms to advance technologically, boosting desulfurization capacities and subsequently enhancing total factor productivity, it also inadvertently results in companies offsetting some environmental compliance costs by curtailing employee wages.

Development of a sustainable multianalyte MEKC method for quantitation of the antihyperlipidemic drugs ezetimibe together with three statins. Greenness and whiteness appraisal studies

Implementing powerful and sustainable research that complies with green analytical chemistry (GAC) and white analytical chemistry (WAC) fundamentals can downsize the environmental compliance costs and fruitfully affects practical and economic issues. Within this framework, rapid and white analytical micellar electrokinetic capillary chromatography (MEKC) methodology was developed for the synchronized estimation of the antihyperlipidemic drugs Ezetimibe (EZE), Atorvastatin (ATO), Rosuvastatin (ROS) and Simvastatin (SIM). The technique was established using fused silica capillary (50 cm, 50 µm id) and the background electrolyte was 0.025 M borate buffer pH 9.2 containing 0.025 M sodium dodecyl sulfate (SDS) and 10% v/v acetonitrile as the organic modifier. Diode array detector was adjusted at 243 nm for ATO and ROS and 237 nm for EZE and SIM. Separation was accomplished within 10 min with migration times of 4.12, 5.42, 8.23 and 8.74 min for ROS, ATO, EZE and SIM respectively. The 4 drugs were quantitated in the concentration range of 10–100 μg/mL and the correlation coefficients were not less than 0.9993. The high sensitivity was illustrated by values of the detection and quantitation limits. The limits of detection for ROS, ATO, EZE and SIM were 0.52, 0.75, 0.42 and 0.64 μg/mL, respectively, whereas, the limits of quantitation values were 1.73, 2.50, 1.40 and 2.13 μg/mL for the studied drugs, respectively. In addition to validation, as reported by the ICH guidelines, greenness and whiteness assessment using the novel AGREE calculator and the holistic functionality model RGB12 were performed. The results proved the efficiency and whiteness of the suggested technique to be routinely implemented in quality control laboratories for the assay of the four drugs and the binary mixtures of EZE with either ATO, ROS or SIM in fixed-dose combined tablets.

Does the pilot emissions trading system in China promote innovation? Evidence based on green technology innovation in the energy sector

The Chinese government promulgated a carbon emissions trading system (ETS) pilot in 2011 and gradually expanded its scope. Based on energy-related green patent applications in 283 Chinese cities from 2003 to 2018, this study investigates the impact of the ETS pilot on green technology innovation in the energy sector (GTIES). By employing a spatial difference in difference (SDID) model and multi-dimensional empirical tests, our results show, first, that the pilot policy has reduced GTIES to a certain extent, due to the higher environmental regulation compliance costs. Second, the ETS pilot has weakened the green technology innovation ability of both pollution intensive industries and non-pollution intensive industries, and its total effect on non-pollution intensive industries is about 1.85 times that on pollution intensive industries. Third, the development of GTIES in pilot regions has been restrained weakly, and the promoting impact on GTIES in the neighboring region is not significant. This study provides empirical evidence for the evaluation of the pilot policy at the city-industry-regional level, revealing enlightenment on industrial policy and the need for regional collaboration in the presence of spatial spillover effects.

Green innovation and the stock market value of heavily polluting firms: The role of environmental compliance costs and technological collaboration

AbstractThis paper introduces a moderated‐mediation model to investigate the relationship between green innovation, as measured by green patent stocks, and firms' stock market value, as measured by Tobin's Q. Using longitudinal data drawn from 351 heavily polluting firms in China's A‐share market from 2007 to 2018, we find that green innovation is likely to affect firms' stock market value positively. A 1% increase in the green innovation over assets index will enhance by 0.18% the Tobin's Q at the firm level. Environmental compliance costs significantly mediate the green innovation‐firms' stock market value association by 8.5%. We also emphasize the positive moderating role of technological collaboration with public research organizations on green innovation‐environmental compliance costs linkage. Our results emphasize that the recurrent question in the extant literature “does it pay to be green?” should be substituted by “how and under what conditions does it pay to be green for firms?” and further stress how firms obtain sustainable development in the environment and economy through green innovation. Implications for firms and investors are also proposed.

A Literature Review of the Factors Affecting the Compliance Costs of Environmental Regulation and Companies’ Productivity

Purpose: The aim of the paper is to identify potential factors that influence the relative size of environmental compliance costs through a literature review and propose a conceptual holistic model of the indirect impact of these factors on companies’ productivity levels. In the literature, the connection between costs associated with environmental regulation and companies’ productivity has been thoroughly tested within what is known as the Porter hypothesis, or simply PH.Design/methodology/approach: The paper applies the methods of integrative review of scientific literature and qualitative research with a document study.Findings: The results point to several key findings. First, the identified potential factors can be divided into two main categories, namely internal factors (size, sector, age, environmental awareness, etc.) and external factors (relevance of environmental regulation for businesses, environmental stimulus measures, quality of institutions, etc.). Second, the wide use of compliance costs within the indicators of stringency of environmental regulation suggests that the relative size of environmental compliance costs is likely to affect companies’ productivity.Practical Implications: The identification of factors affecting the size of compliance costs provides valuable insights to policy makers for the implementation of environmental regulation and making it more effective while not being discriminatory in terms of presenting an excessive burden to certain types of companies.Originality/significance: There has been a gap in the literature on environmental regulation compliance costs, as so far no study has comprehensively addressed all the potential factors influencing the relative size of environmental compliance costs for companies.

Economic analysis of international environmental agreements: lessons learnt 2000–2020

On the occasion of the 20th anniversary of International Environmental Agreements: Politics, Law & Economics, we conduct an extensive review of papers published in this journal that address the economic dimensions of international environmental agreements (IEAs). We focus particularly on the lessons learnt from this body of literature and the implications for the assessment and design of IEAs in relation to goals such as efficiency, effectiveness, and equity. Our key conclusions run as follows. First, at the international level, universal coalitions are more cost-efficient and effective than fragmented regimes, but more difficult to negotiate and less stable. Second, in developing countries, there is need for substantial external funding to cover the short-run costs of environmental compliance. Third, market-based solutions have been increasingly applied in international agreements but with mixed results. For example, cap-and-trade systems have the potential to achieve greenhouse gas emissions reductions and least economic cost. But in the provisioning of water services, private sector solutions often result in outcomes that are unaffordable for low-income groups or nonviable for businesses, suggesting well-designed public–private partnerships. At the international level, Green Bond markets can attract investors for climate and environmental projects, but implementation failures tend to weaken outcomes. Finally, in practical politics, economically optimal designs are rarely achieved. Future applied economic research should therefore critically investigate institutions and the scope for their reform. Gains in knowledge are expected to come from economic analyses taking a broader perspective on “the economy”, taking institutions and social and ecological relations into account from the start.

Estimating Environmental Compliance Costs at the Installation Level

Estimating Environmental Compliance Costs at the Installation Level

How do industrial land price and environmental regulations affect spatiotemporal variations of pollution-intensive industries? Regional analysis in China

The spatial agglomeration of pollution-intensive industries (PIIs) leads to an increase in environmental risks. Land price and environmental compliance costs are important elements of the production costs of PIIs, which may affect the location selection of PIIs and further affect industrial distribution. However, there is a lack of research into the impacts of the incompletely competitive industrial land market on the distribution of PIIs. Moreover, the impacts of environmental regulations on PIIs are also controversial. This study characterizes spatiotemporal variations of PIIs at a city level in China from 2007 to 2016 with the newly-expanded industrial land use data and establishes a geographically weighted regression model to estimate the impacts of industrial land price and environmental regulations on the distribution of PIIs. The results are as follows: 1) PIIs tend to be relocated to the less developed area of western China. Due to the relatively lower land and labor costs in western China, land use by PIIs in this area as a proportion of the national total gradually increases, and new high-density areas of PIIs are formed in the northwest region of China. 2) PIIs are sensitive to land cost and tend to locate where the industrial land price is low, and with the marketization level of industrial land being higher, the negative impacts of industrial land price on PIIs become stronger. 3) The regression results for environmental regulations do not support the pollution haven hypothesis. Regional differences in the production costs caused by the improvements in environmental regulation intensity are not sufficiently large to form a pollution haven. This study uses newly-expanded industrial land use data to characterize the distribution of PIIs, which can directly reflect the location selection of PIIs. Moreover, the inter-city analysis can contribute to a deeper understanding of the relocation of PIIs in China at finer geographical scales. According to the results obtained, a reasonable industrial guidance mechanism need to be established to promote environmental equity, and land markets need to be further perfected to optimize the industrial layout.

Analytical Models to Characterize Trade-Offs Between Technological Upgrading and Innovation

We propose two analytical models to characterize the relationship between technological upgrading and innovation in the oil & gas industry. The first one is an “optimization model” which focuses on the trade-offs between profit maximization and environmental compliance cost. The other has been developed based on “predator-prey” model which captures the dynamics of biological systems. Our study contributes to the strategic planning process for sustainable development by providing the insight that optimal allocation process is determined by multiple operational factors, including a firm’s competitive ranking among its industrial competitors, industrial consent on the concurrent rate of return on capital investment, the projected demand of oil & gas in future, and a change in environmental compliance cost. Further, we add to the robustness of the optimal allocation process by providing binding conditions of the set of solutions.

Marine Energy Environmental Permitting and Compliance Costs

Costs to permit Marine Energy projects are poorly understood. In this paper we examine environmental compliance and permitting costs for 19 projects in the U.S., covering the last 2 decades. Guided discussions were conducted with developers over a 3-year period to obtain historical and ongoing project cost data relative to environmental studies (e.g., baseline or pre-project site characterization as well as post-installation effects monitoring), stakeholder outreach, and mitigation, as well as qualitative experience of the permitting process. Data are organized in categories of technology type, permitted capacity, pre- and post-installation, geographic location, and funding types. We also compare our findings with earlier logic models created for the Department of Energy (i.e., Reference Models). Environmental studies most commonly performed were for Fish and Fisheries, Noise, Marine Habitat/Benthic Studies and Marine Mammals. Studies for tidal projects were more expensive than those performed for wave projects and the range of reported project costs tended to be wider than ranges predicted by logic models. For eight projects reporting full project costs, from project start to FERC or USACE permit, the average amount for environmental permitting compliance was 14.6%.

Environmental Compliance and Enterprise Innovation: Empirical Evidence from Chinese Manufacturing Enterprises.

This paper embeds environmental compliance factor and compliance cost factor into the M-O monopolistic competition and multi-product firm model to construct a theoretical model applicable to environmental compliance and enterprise innovation. In addition, we also construct a new environmental compliance index. We use the random-effects Tobit model and the double hurdle model to empirically test the micro-data from the Database of China Industrial Enterprises from 1998 to 2013, then we use the Generalized Propensity Score Matching (GPSM) to conduct a robustness test. The robustness conclusion is that environmental compliance has a significant U-shaped relationship with enterprise innovation, which means, environmental compliance will inhibit enterprise innovation on the left of the inflection point of environmental compliance (0.669), while environmental compliance on the right of the inflection point will promote enterprise innovation. The sub-sample regressions show that, enhanced environmental compliance of state-owned enterprises, mature enterprises, core area enterprises and export enterprises with low level of the environmental compliance, makes the greater inhibition to enterprise innovation, and enhanced environmental compliance of above enterprises with high level of the environmental compliance, makes the greater contribution to enterprise innovation. To this end, the government should adopt the policy, from the shallower to the deeper, to promote the construction of environmental compliance, and identify the inflection point of the environmental compliance on enterprise innovation to stimulate the role of environmental compliance in promoting enterprise innovation.

Environmental Permitting and Compliance Cost Reduction Strategies for the MHK Industry: Lessons Learned from Other Industries

The marine and hydrokinetic (MHK) industry plays a vital role in the U.S. clean energy strategy by providing a renewable, domestic energy source that may offset the need for traditional energy sources. The first MHK deployments in the U.S. have incurred very high permitting costs and long timelines for deploying projects, which increases project risk and discourages investment. A key challenge to advancing an economically competitive U.S. MHK industry is reducing the time and cost required for environmental permitting and compliance with government regulations. Other industries such as offshore oil and gas, offshore wind energy, subsea power and data cables, onshore wind energy, and solar energy facilities have all developed more robust permitting and compliance pathways that provide lessons for the MHK industry in the U.S. and may help inform the global consenting process. Based on in-depth review and research into each of the other industries, we describe the environmental permitting pathways, the main environmental concerns and types of monitoring typically associated with them, and factors that appear to have eased environmental permitting and compliance issues.

Environmental Compliance Cost and Productivity Growth in US Manufacturing

The decade of 1970s is generally known for its dramatic increases in the price of oil. What is less known, however, is the fact that U.S. industrial sector experienced a significant slow down in productivity growth during the 1970s and 1980s. While many studies have analyzed the economic impact of higher energy prices on industry, the research on productivity slow down has been rather slow. The task of unraveling the cause of this productivity mystery is further complicated by the fact that this period also marks the beginning of an era of unprecedented environmental controls as Congress passed a series of sweeping amendments to the Clean Air Act (CAA) law in the 1970s and again in 1990. As a result of these amendments to the CAA the U.S. industry was faced with mounting environmental compliance cost. While environmental regulations are generally believed to impair productivity few studies have considered environmental regulation.

Will recent boom in coal power lead to a bust in China? A micro-economic analysis

In this paper, by adopting the levelized cost of electricity model and the financial appraisal method, we provide an economic interpretation for China's recent coal power bubble under weak demand growth. The study surveys the economics of a typical 600MW newly-built pure condensing coal-fired power plant in six case provinces (Shanxi, Inner Mongolia, Xinjiang, Hebei, Jiangsu and Guangdong), where the profitability margins of coal power are above national average by the end of 2015. Results indicate that the continuous falling in coal prices have lowered the generation costs but there has been insufficient adjustment to the benchmark on-grid tariff, enabling coal power to obtain unprecedented excess profits. Such excess profits have spurred the investment and caused local government to over-rely on coal power under economic downturn. However, in the context of cost escalation by deteriorated operation efficiency, higher environmental and climate change compliance costs and fierce market competition, the profitability of coal power will dissipate soon. Integrated power capacity plan consistent with the new economic normal, stringent control on the scale of new coal power projects and deep power market reform are the key policy implications of our analysis.

Constraining Forest Certificate's Market to Improve Cost-Effectiveness of Biodiversity Conservation in São Paulo State, Brazil.

The recently launched Brazilian “forest certificates” market is expected to reduce environmental compliance costs for landowners through an offset mechanism, after a long history of conservation laws based in command-and-control and strict rules.In this paper we assessed potential costs and evaluated the cost-effectiveness of the instrument when introducing to this market constraints that aim to address conservation objectives more specifically. Using the conservation planning software Marxan with Zones we simulated different scopes for the “forest certificates” market, and compared their cost-effectiveness with that of existing command-and-control (C&C), i.e. compliance to the Legal Reserve on own property, in the state of São Paulo. The simulations showed a clear potential of the constrained “forest certificates” market to improve conservation effectiveness and increase cost-effectiveness on allocation of Legal Reserves. Although the inclusion of an additional constraint of targeting the BIOTA Conservation Priority Areas doubled the cost (+95%) compared with a “free trade” scenario constrained only by biome, this option was still 50% less costly than the baseline scenario of compliance with Legal Reserve at the property.

Measuring the cost of environmental compliance for Waikato dairy farmers - a survey approach

The link between dairy farm systems and cost of environmental compliance is not always clear. A survey of Waikato dairy farmers was conducted to establish the real (non-modelled) cost of compliance with environmental regulation in the region. Quantitative and qualitative data were gathered to improve understanding of compliance costs and implementation issues for a range of Waikato farm systems. The average oneoff capital cost of compliance determined through a survey approach was $1.02 per kg milksolids, $1490 per hectare and $403 per cow. Costs experienced by Waikato farmers have exceeded average economic farm surplus for the region in the past 5 years. As regulation increases there are efficiencies to be gained through implementing farm infrastructure and farm management practice to best match farm system intensity. Keywords: Dairy, compliance, farm systems, nitrogen, Waikato