Searching for the Profit in Pollution Prevention: Case Studies in the Corporate Evaluation of Environmental Opportunities
Discussion Paper 98-30
48 Pages Posted: 7 May 1998
Date Written: May 1998
The concept of pollution prevention, or "P2," signifies a new, proactive environmental mindset that targets the causes, rather than the consequences, of polluting activity. While anecdotal evidence suggests that P2 opportunities exist and that many have been pursued, there is also the perception that the pace of P2 is far too slow. To explore that claim -- and to shed light on barriers to P2 innovation -- this paper presents case studies of industrial P2 projects that were in some way unsuccessful. Economic, financial, and accounting analysis is used to assess the rationale for, and soundness of, these corporate decisions. While based on a very limited sample, the evidence contradicts the view that firms suffer from organizational weaknesses that make them unable to appreciate the financial benefits of P2 investments. Instead, the projects foundered because of significant unresolved technical difficulties, marketing challenges, and regulatory barriers. Based on evidence from the cases, the paper concludes with a discussion of environmental policy reforms likely to promote P2 innovation.
JEL Classification: Q2, L65, O33
Suggested Citation: Suggested Citation