Environmental Policy and Competitiveness in a Globalizing World: Challenges for Low-Income Countries in the UNECE Region

A major policy goal of low-income countries is to promote the creation of competitive economic capacities in order to achieve sustained growth and raise the material well being of the population. Economic growth is, however, associated with increasing environmental pressures, and the question is to what extent the costs of more stringent environmental policies will affect the competitiveness of domestic firms. This paper examines the empirical evidence on the impact of environmental protection costs on international trade and FDI location decisions and explores the opportunities that the process of technological upgrading, which is a major driving force of economic development, provides for reducing environmental pressures. Also considered are the policies and supportive institutional arrangements that can help to effectively integrate environmental protection into national economic development strategies and thereby promote sustainable production and consumption patterns.