Strict environmental laws ‘push’ firms to pollute elsewhere
Study highlights need for global cooperation on policies
Jeff Grabmeier
Multinational companies headquartered in countries with tougher environmental policies tend to locate their polluting factories in countries with more lax regulations, a new study finds.
While countries may hope their regulations will reduce emissions of carbon dioxide and other greenhouse gases, these results show that these policies can lead to “carbon leakage” to other nations, said Itzhak Ben-David, co-author of the study and professor of finance at The Ohio State University’s Fisher College of Business.
“Firms decide strategically where to locate their production based on existing environmental policies, with the result being that they pollute more in countries with lenient regulations,” Ben David said.