The impact of environmental policy on industrial sectors: empirical evidence from 14 European Countries

This paper analyzes the relation between environmental policy and a firms environmental investment expenditure, environmental performance, and international competitiveness using primary survey data. Our empirical analysis illustrates that environmental policies are important drivers of environmental investment expenditure which, in turn, has a positive impact on both environmental and economic performance. Moreover, only investment expenditure in pollution prevention mechanisms (process integrated technologies) results in better environmental and economic performance, while investment expenditure in pollution control mechanisms (end-of-pipe technologies) have no impact on a firms overall environmental performance, nor on a firms competitiveness or strategic advantage. Investment in end-of-pipe technologies even results in less efficient resource use. Finally, also a firms environmental strategy affects environmental investment expenditures.