Green policies do not affect productivity, says OECD study

Stricter environmental regulations do not necessarily harm productivity, according to new research published by the OECD.

The study developed an indicator of environmental policy stringency (EPS) for 24 OECD countries over the period 1990–2012, and analyzed how changes in EPS related to the output of manufacturing firms.

It concluded that "an increase in stringency of environmental policies does not harm productivity growth or productivity levels—neither from the perspective of the entire economy nor from that of manufacturing industries."

The Nordic countries and Denmark were found to have the strictest environmental policies, with Greece, Ireland, and Portugal at the most lenient end of the scale. However, environmental policies had become more stringent across the board over the period.

The researchers found that tightening environmental regulations had a small negative effect on manufacturers that were already less productive, but slightly increased the productivity of the most technologically advanced firms.

IZA World of Labor author Olivier Deschenes has previously written for us about the effects of environmental regulations on labor markets. He argues that: "Air quality standards generally have negative effects on industry employment, productivity, and worker earnings. But these private costs are small relative to the social benefits of better health outcomes for the population."

Access the full report here.

Related articles:
Environmental regulations and labor markets, by Olivier Deschenes
Employment effects of green energy policies, by Nico Pestel