Question

Some believe that tough environmental regulations add costs, reduce firm competitiveness, and drive some firms to invest elsewhere. Others argue that tough environmental regulations force firms to be innovative and thus enhance competition and competitiveness. What do you think?

Answer 1

Tough environmental regulations definitely add to the costs and reduce productivity in the short run, thereby reducing firm competitiveness and also force some companies to shift elsewhere because of expensive technology and overall increased costs, but the advantages of having strict environmental regulations overweigh the problems that arise, when they are imposed.

Some of the major advantages of such regulations are that the environment is less harmed, the companies are forced to think of better and innovative technologies and ideas, that in the long run are very benefitial. The compeitiveness is increased as other companies also make an initiative to come up with more eco-friendly ideas of operations, thereby reducing the harmful impacts on the environment. The companies are motivated to invest in clean technology, that is beneficial  for the overall environment, as well as the people working in the firm. Many companies are able to balance the expenses of such strict regulations in the long run, making the business successful.