February 22, 2021 Critics claim environmental regulations hurt productivity and profits, but the reality is more nuanced, according to an analysis of environmental policies in China by a pair of Cornell economists. The analysis found that, contrary to conventional wisdom, market-based or incentive-based policies may actually benefit regulated firms in the traditional and “green” energy sectors, by spurring innovation and improvements in production processes. Policies that mandate environmental standards and technologies, on the other hand, may broadly harm output and profits. “The conventional wisdom is not entirely accurate,” said Shuyang Si, a doctoral student in applied economics and management. “The type of policy matters, and policy effects vary by firm, industry and sector.”