Dirty Industries Research Articles

Assessing the economic impacts of eco‐innovation strategies across contexts shaped by different institutional and structural pressures

AbstractIn the face of escalating environmental challenges, eco‐innovation (EI) has emerged as a crucial strategy for businesses aiming to balance ecological responsibility with economic and social performance. This study explores the impact of various EI strategies on the economic performance of firms, analyzing the contingent effect of both institutional and structural factors in dirty and clean industries. Using data from the Spanish Technological Innovation Panel (PITEC) spanning the period 2009–2016, our findings reveal that context matters for the effectiveness of EI strategies in enhancing economic performance. In stable environments with low institutional pressures, dirty industries benefit from R&D‐centric strategies, whereas in clean industries only efficiency‐centric and ambidextrous strategies yield economic gains. Similarly, in moderate institutional environments, the advantages offered by EI strategies hold for clean and dirty industries; however, ambidextrous EI strategies yield more economic advantages in both industry types. In dynamic environments, proactive strategies such as R&D‐centric and ambidextrous approaches are crucial for both dirty and clean industries. Firms in this situation should thus invest in assets and practices that enhance R&D for EI, as efficiency‐centric strategies are less effective in dynamic contexts. The findings have interesting implications for managers and policymakers, underlining the need for a nuanced approach to supporting and implementing EI initiatives.

The Impact of ESG Regulations and Taxonomy on the Credit Process in Commercial Banks

The purpose of the article is to present the impact of legal regulations in the field of sustainable development (ESG) and taxonomies on the course of credit processes in commercial banks. Methodology refers to studies of legal regulations, comparative analysis of cases (case study) and inference. Results of the research show that the implementation of ESG regulations and taxonomies and the adaptation of credit processes in commercial banks will result in structural changes in loan portfolios in the near future while moving away from financing dirty industries towards the green ones. As a result, the financing stream for green assets and those supporting sustainable development will be increased, while the financing of dirty assets will be significantly reduced due to the increase in risks and accompanying costs for customers and banks. It is expected that even if some banks grant loans to finance dirty assets, they will only be short-term loans and will require high servicing costs (commission, margin, legal security, and insurance). This is due to the fact that the portfolio with credit exposures in the so-called dirty industries (mining, construction, trade) will escalate the increase in ESG risk. Such a portfolio with dirty exposures will require banks to secure additional reserve capital to maintain higher general and sector systemic risk buffers. Some banks will completely stop financing assets from dirty industries, which will mean that some of them will be abandoned due to the lack or high costs of their modernization, intensifying the negative socio-economic consequences. The ongoing process of redirecting the financing stream to green assets in banks means that enterprises and households need to take earlier adaptation actions. These include actions against financing constraints in dirty sectors and likely future losses in infrastructure and assets related to them.

Does eco-innovation stimulate employment? The case of Spanish manufacturing firms

The demand for eco-products due to the exigency of friendly and environmental production could affect the employment of the firms. This paper tests whether product and process eco-innovations boost employment in Spain differentiating by the environmental goals (material and energy efficiency and environment responsiveness), by the level of qualification of the workers, and by the dirtiness of the industries. We apply a Green Harrison model, using the Technological Innovation Panel (PITEC) for Spain from 2008 to 2016. Results show a positive relationship between all types of product eco-innovations and employment, while the influence of process eco-innovations on employment depends on the environmental goals, the level of skills, and the industry. Specifically, distinguishing by industry there is a labour-saving effect in clean industries and a labour-friendly effect for low-skilled employment in dirty industries.

The role of greenfield investment and investment freedom on environmental quality: testing the EKC hypothesis for EU countries

ABSTRACT Foreign investments, viewed as a matter of social responsibility, can improve environmental quality in the host country. In addition, although foreign investors promote economic development because they prefer countries where environmental policies are not stringent, they may increase environmental degradation by transferring dirty industries to host countries. However, in EU countries, environmental policies are strictly implemented, and incentives are offered to increase investments in clean sectors. In this context, there is a widespread opinion that greenfield investments will be environmentally friendly thanks to environmental regulations in EU countries. Despite this, no study has been found that analyzes these views empirically. In this study, the effect of greenfield investment and investment freedom on environmental quality in EU countries for the period 2003–2022 is investigated with panel cointegration and long-run estimators within the framework of the EKC hypothesis. According to the results of the study, while greenfield investment increases environmental quality in Italy and Romania, investment freedom increases environmental quality in Belgium, Croatia, Denmark, Italy and Spain. The EU should set a standard in order to attract environmentally friendly foreign investments, taking into account its strategic location and infrastructure.

Overselling corporate social responsibility

AbstractWe show that firms hype up their corporate social responsibility (CSR) narratives during the turn‐of‐the‐year earnings conference calls to project an overly responsible public image of their firms. This previously unexplored phenomenon does not appear to be related to past, current, and future CSR engagements and cannot be explained by observed time‐varying firm attributes and unobserved time‐invariant firm and CEO attributes. We find that the fourth‐quarter CSR narrative hike is more pronounced among firms that are (ex ante) expected to do more corporate good as well as firms embedded in dirty industries, but less prevalent among firms facing elevated product‐market threats. Although elevated CSR narrative is associated with positive short‐term market reaction and lower near‐term stock price crash risk, such behavior tends to reduce financial report readability and leads to lower equity valuation in the longer term. Our analyses suggest that CSR narrative hike at the turn‐of‐the‐year is a pervasive phenomenon in the corporate landscape and may have valuation and governance implications.

The environmental externality of economic growth target pressure: evidence from China

PurposeThis study aims to investigate the external effect of the economic growth target pressure of local governments on establishment-level SO2 emissions.Design/methodology/approachBased on manually collected panel data of 74,058 China's industrial establishments and more than 330 thousand observations from CIED and ESR, the authors use a firm-fixed effect model, instrumental variables estimation and heterogeneity tests to identify the environmental externality of economic growth target pressure.FindingsThe establishments in cities that meet or slightly exceed the economic growth target experience greater negative externality measured by SO2 emission intensity. This external effect is more pronounced in regions: with a strict and overweighted target setting; with stronger officials' promotion incentives; with a low degree of marketization; and in firms with great economic importance. The authors identify the underlying mechanisms of dependence on dirty industry and the relaxation of environmental enforcement. And the environmental protection constraints in 2007 mitigate the negative externality.Practical implicationsThe paper sheds light on to what extent economic growth target pressure has a negative externality of pollution in China and how this pressure may conflict with environmental protection.Originality/valueThis paper complements prior research on the economic effects of economic growth targets, expands the knowledge on the determinants of establishment-level pollution emission from the perspective of target pressure and provides insight into the environmental externality that results from political factors.

Carbon capture and utilization: More than hiding CO2 for some time

Carbon capture and utilization: More than hiding CO2 for some time

Multi-Tasking Policy Coordination and Corporate Environmental Performance: Evidence from China

This paper investigates how local governments coordinate the relationship between economic growth targets (EGT) and environmental protection targets (EPT) and the impact of such coordination on firm's environmental performance. Using the pollution emission data of China's industrial firms covering 2003 to 2013, we show that firms in the cities where officials are setting overweighted economic growth targets have more sulfur dioxide intensity, while the central government's hard constraints on EPT included in the official performance evaluation system could partially mitigate the environmental externality of the economic growth target. Further, we find that overweighted EGT significantly decreases firms' desulfurization facilities, capacity, and ratio, while the hard constraint of EPT helps mitigate this negative relationship. We also find that the positive relationship between overweight EGT and firm emissions is more pronounced in the dirty industry, while the hard constraint of EPT helps to mitigate this relationship. The above results help to identify an underlying mechanism of environmental regulation. Finally, we show that converting the hard constraints of environmental protection targets to self-constraint by local government officials could reverse the environmental externality of the economic growth target.

Are emerging economies a pollution haven? a new era in dirty industrial trade

The hypothesis that international trade causes pollution and environmental damage is still debated and creates heat rather than light. Right extremists argue that trade encourages investment and economic growth while accretion benefits cover the environmental cost. Other extremists claim that international trade is a pollution transmitter (flight industry) from developed countries to countries with laxer policies and low costs. It creates a world pollution haven through the production and trade of dirty industries, especially in countries with abundant factors and low costs. This study aims to investigate the existence of pollution havens as a source of environmental pollution in developing economies. This research method uses a unit root test to estimate the presence of pollutants in each country. This study also employs the dirty industry's trade balance index (TBI) for 44 countries worldwide. The results of this study show that most emerging economies tend to be pollution havens (PH) of developed countries. This finding provides different effects on the pollution haven effect (PHE): full, partial, and clean PH. The implication is that strong environmental policies are necessary for developing economies through a commitment to implementing the SDGs. In addition, global conformity, technological innovation, and strong institutions are required to achieve a clean economy and sustainable development.

To Starve or to Stoke? Understanding Whether Divestment versus Investment Can Steer (Green) Innovation

More than 1,500 organizations and investors representing more than $40 trillion in assets have committed to fossil fuel divestment to combat climate change. Will it work? This chapter explores whether divestment might induce green innovation, a critical component of the transition to a cleaner economy. Divestment could theoretically steer innovation by increasing the cost of capital for “dirty firms,” but it is unclear whether the effects will be large enough to significantly reduce investment opportunities. I argue that continuing to invest in dirty industries could drive green innovation conditional on investors being socially conscious and governing through “voice.” This hinges upon understanding which firm strategies actually foster green innovation, though, and the commonly used environmental, social, and governance indicators come with several limitations. I demonstrate how decomposing them and using alternative approaches to measuring environmental performance can improve investment, strategy, and management decision-making and policy design. I examine the relationship between 14 specific practices and whether large firms in 16 pollution-intensive sectors are on track for meeting the Paris Agreement emissions targets (“carbon performance”). I find no correlation between carbon performance and the most basic practices, such as disclosing emissions, but a positive correlation for five more explicit strategies: setting long-term quantitative emissions targets, having a third party verify emissions data, incorporating environmental performance into executive remuneration policies, supporting governmental climate change efforts, and setting an internal price of carbon. I construct a new “best practices” score based on these results and find that it has a much higher correlation with carbon performance than some other composite measures.

Waste Haven Transfer and Poverty-Environment Trap: Evidence from EU

This paper tests the extent to which the migration of "waste haven" causes a "poverty-environment trap". That is to say, imported waste caused the mid-income trap of the less developed European countries. Using Spatial Durbin Model on waste carbon dioxide emission of 28 EU countries from 2001 to 2018, we estimate the carbon footprint of imported wastes of the European Union (EU) members. The result shows an inverted "U" shape curve between GDP per capita and imported waste carbon footprint, confirming an Environment Kuznets Curve of "waste haven" transfer. It hinders the inbound of high-quality FDI. In the further mechanism test, we found industrial structure, FDI, industrialization, and urbanization are responsible for the spatial-temporal transfer of "pollution haven" and "environmental-poverty trap". The results also show that "waste haven" may accelerate the economic growth of less developed countries to some extent, however, with a higher percentage of dirty industries, FDI in the pollution-intensive sectors of these countries worsens their environmental conditions. It reinforces pollution haven effects and created a vicious circle of "poverty-environment trap" for low-income countries in the EU.

On the green subsidies in a differentiated market

Government subsidies play an important role in promoting the development of green products. This paper examines the impact of subsidies on competing firms, consumers and the environment in a horizontally differentiated market. Taking all stakeholders into consideration, the optimal subsidy level is solved to maximize social welfare. Compared with the no subsidy case, we show that subsidies always make consumers better, however, this welfare improvement may come at the expense of firm profits and environmental benefits. Specifically, when products are highly substitutable and consumers’ environmental awareness is great, subsidies can induce competing firms to over-invest in green R&D and produce more quantities and thus leading to reduced firm profits. Moreover, subsidies would widen the gap between asymmetric firms, making those firms in a weak competitive position even more disadvantaged. As for the environment, we find that for industries with high levels of emissions per-unit of output, the negative effect of subsidies to induce more production/consumption would dominate the positive effect of the improvement in product greenness, leading to environmental degradation. As a result, subsidies are optimal for clean industries, while punitive policies that limit production and consumption may be more effective for those dirty industries. We also compare ad valorem subsidies and green R&D subsidies, showing that for the same amount of subsidies, an ad valorem subsidy is more in the interest of firms, while consumers are better off under the R&D subsidy policy as it increases the competition in green efforts more directly.

Is dirty trade concentrating in more polluting countries? Evidence from Africa

Among growing concerns about the environmental impact of human activities, international trade is increasingly in the spotlight. However, the role of Africa has been widely disregarded. In this paper, we assess the trade–environment link in African trade patterns by estimating a gravity model for trade with data from 140 countries for the period 2002–2018. Our findings reveal significant insights: first, that dirty trade appears to be increasingly concentrating in African countries. That is, exports of dirty goods seem to have shifted to countries with less stringent environmental regulations. Second, exports from dirty industries tend to concentrate in those countries with higher levels of capital endowments, although this effect appears to be weaker. Third, the results hold when we consider different exporter and importer country scenarios, such as trade flows with Europe (the main African trading regional partner) and intraregional African trade patterns. In addition, they hold especially for more differentiated products, with some particularities in the case of homogeneous ones. These findings have important implications in terms of both trade and environmental policies as well as for building the basis for sustainable development in Africa.

Gender Diversity in R&D Teams and Firms’ Eco-innovation Strategies

This paper examines, for the first time, whether an increase in the gender diversity in a firm’s R&D team increases the firm’s likelihood of adopting an eco-innovation strategy. We also examine whether this effect differs between clean and dirty industries, end-of-pipeline and integrated cleaner technologies, and firms with and without prior experience in eco-innovation. The empirical analysis employs propensity score matching to account for endogeneity and unobserved firm heterogeneity, using Spanish firm level data during 2009-2016. We find robust evidence that gender diversity of the R&D team matters for firms’ eco-innovation. The results bear important policy and practical implications.

Environmental Additionality: The Effect of Innovation Support on Firms’ Eco-Innovation Strategies

This paper examines the effect of generic innovation policy on eco-innovation rather than generic innovation. Hence in doing so, the paper analyses the existence of environmental additionality of generic innovation policy. The empirical analysis applies propensity score matching to account for endogeneity and unobserved firm heterogeneity, using Spanish firm level data during 2008-2016. We find that in the short term, regional policy is effective in stimulating eco-process innovation, and in complementing national policy in fostering eco-product innovation. Conversely, national policy is effective in increasing eco-product innovation. Both are similarly effective in incentivising the reduction of environmental impact in dirty industries.

Dirty Industry, Heritage, and the Erasure of Immigrant Pasts

Abstract: Industry is dirty, and land, soils, and sites remain toxic even after operations have diminished or closed. Dominant heritage frameworks, aligned with narratives that serve national interests, and environmental plans, have not yet imagined the heritage futures of industrial landscapes— nor the narratives that link the industrial pasts of workers to the present and the future. Significant labor histories are frequently diminished, marginalized, or omitted altogether. Major nation-building industries in Australia, America, Canada and northern Europe were dependent on immigrant labor drawn from Asia, Europe, and South America, and their stories are embedded in the large tracts of industrial sites that have become wastelands of defunct and demolished structures. “Dirty” extends onto a linguistic terrain of “dirty histories” and the silencing of particular histories parallel the masking of environmental toxicity. Focusing on the Port Kembla steelworks in Australia, this article examines immigrant industrial labor history and develops a perspective from which to rethink heritage practice and the theoretical development of critical carbon. If critical carbon is conceptualized as a matter that concerns both the exploitation of land and of peoples, this article argues that heritage practice needs to develop projects around immigrant heritage sites such as the steelworks.

The asymmetric relationship between foreign direct investment, oil prices and carbon emissions: evidence from Gulf Cooperative Council economies

We investigate the asymmetric nonlinear link between foreign direct investment, oil prices, and CO2 emissions for the Gulf Cooperation Council nations, using foreign direct investment and oil price data. As foreign direct investment is positively associated with carbon emissions in the long run and oil prices have positive, significant effects on CO2 emissions, our findings support the pollution-haven hypothesis. Furthermore, these variables have an asymmetric nonlinear relationship, which corresponds to the theoretical expectations of the pollution-haven hypothesis. We also find that negative changes in foreign direct investment have positive, significant impacts on carbon emissions in the short run, implying that foreign enterprises utilize green technologies in their manufacturing processes in the short run. In the long run, however, negative changes in oil prices are positively associated with carbon emissions. These findings should help Gulf Cooperation Council economies focus on policies that encourage foreign direct investment in green rather than dirty industries in order to ensure environmental sustainability.

Economic freedom vs. egalitarianism: An empirical test of weak & strong sustainability, 1970–2017

AbstractMany argue that free markets drive climate change and harm environmental sustainability. They suggest that democratic controls over profligate capital and unregulated markets better secure economic wellbeing and environmental objectives. Eco‐modernists, contrarily, argue that economic freedoms generate entrepreneurial technological change for reducing poverty and increasing environmental quality since people's demands for cleaner consumption are likely to be met by markets, and free markets are less likely to be affected by rent‐seeking. Moreover, democratic publics also demand higher consumption and the protection of jobs in dirty industry, which would work against environmental causes. This study contrasts the effects of economic freedom and egalitarian democracy on environmental sustainability and atmospheric pollution, assessed as both weak and strong sustainability. The results show that economies that are friendlier to free markets increase physical capital (wealth) with lower damage to total environmental sustainability, measured as depletion of physical, human, and natural capital, including atmospheric pollution. Egalitarian democracy consistently reduces economic sustainability and increases atmospheric pollution. There is some evidence for an inverted‐U shape relationship between egalitarianism and CO2 emissions independently of economic freedom and the level of development. The results are robust to a battery of testing procedures, alternative models and data, different sample sizes, a barrage of relevant diagnostic tests of robustness, and potential endogeneity.

The Trajectory of Illicit Waste Trade in Africa: Implications for Human Rights and Sustainable Development

As globalisation intensifies, the environmental burden of economic development is being shifted to poor countries. This development manifests in waste trade involving the transboundary shipment of toxic waste from developed to developing countries. This article evaluates the strategies with which waste trade is being perpetuated to the detriment of sustainable development and human rights values in Sub-Sahara Africa. It argues that capitalism has influenced massive generation and commodification of waste, especially in industrialised countries. It has also established that globalisation has made the transboundary shipment of waste easy. Moreover, foreign investments in the waste industry in developing countries appear to be a means by developed countries to perpetuate waste shipment to developing countries, which helps waste traders to avoid stringent regulations and high costs of waste management in developed countries. Therefore, such investments in developing countries should not always be viewed as a breakthrough in attracting foreign investments. The findings made include that despite the existence of the Basel and Bamako Conventions at global and regional levels, respectively, waste trade has continued in different forms in Africa, where waste merchants exploit the low-cost facilities, cheap labour and weak regulatory frameworks. The trend includes the reckless dumping of hazardous industrial waste, electronic waste as well as ostensible investment in “dirty industries” in some African countries. It concludes by urging the states to individually establish robust mechanisms that protect the environment and enforce environmental rights. These measures will help complement the collective efforts they have made in multilateral and regional agreements.

The influence of fuel and energy systems on atmospheric air pollution by enterprises of the metallurgical and machine-building complex

Currently, billions of tons of industrial waste from ferrous and non-ferrous metallurgy enterprises have accumulated in Russia. Ferrous metallurgy is one of the most environmentally dirty industries. The history of the environmental problem of the city of Nizhny Tagil, goes back to the beginning of the creation of the mining industry of the Urals. The development of mining, chemical, metallurgical production, mechanical engineering is formed by the increasing pressure of anthropogenic factors on the environment. Emissions of industrial enterprises, energy systems and transport into the air, at the present stage of the development of science and technology, have reached such a size that in some areas, especially in large industrial centers, pollution levels are several times higher than permissible sanitary standards.