Pollution Havens: An Analysis of Policy Options for Dealing with an Elusive Phenomenon

Abstract

One cannot expect developing countries to have the same environmental standards as developed ones. Standards can be at their efficiency levels and yet lower than in developed countries due to differences in emissions, the pollution absorptive capacity, and the intensity of environmental preferences. However, developing countries can be said to provide a “pollution haven” if their environmental standards are below their efficiency levels or if they fail to enforce their standards in order to attract foreign investment. This article analyses which factors can give rise to pollution havens. The evidence pertaining to pollution havens is reviewed. It is argued that in spite of the rather limited evidence for the existence of pollution havens, it is nevertheless important to evaluate policy options for tackling them. A comprehensive range of options are evaluated according to whether they appear to be effective, politically realistic, development friendly, closed to abuse, and not unnecessarily restrictive.