The Porter Hypothesis at 20: Can Environmental Regulation Enhance Innovation and Competitiveness?

Some twenty years ago, Harvard Business School economist and strategy professor Michael Porter challenged conventional wisdom about the impact of environmental regulation on business by declaring that well-designed regulation could actually enhance competitiveness. The traditional view of environmental regulation held by virtually all economists until that time was that requiring firms to reduce an externality like pollution necessarily restricted their options and thus by definition reduced their profits. After all, if profitable opportunities existed to reduce pollution, profit-maximizing firms would already be taking advantage of them. Over the past twenty years, much has been written about what has since…