Foreign Direct Investment and Environment Regulations: Analytic Study

Mohamed Hicham Balouza¹
1-Lebanese University

ABSTRACT:

This paper examined three different approaches of environmental regulations: Command-and-control approach, economic incentive approach and non-mandatory approach. In the first approach, there is involvement of the government such that it determines the standard of pollution emissions and the method to be adopted technologically ensuring thereby that the standards are fulfilled. On the contrary, in the second approach, producers enjoy the freedom to select their own technologies and methods in as much as legal standards are respected and rewards are provided financially for pollution reduction below the legal levels. As for the voluntary or non-mandatory approach, firms enhance their performance by voluntarily choosing the proper actions that are pushed by self-interest as firms do not risk losing acceptance of the public after disclosing information on their environmental performance. This paper highlights the importance of regulations enforcement, compliances and incentives. This entails studying the effect of imperfect information on environmental regulations. Hence the role of information is very vital for environmental regulations efficiency.

Keywords: FDI, Environment regulations, Command-and-control approach, Economic incentive approach, Non-mandatory approach