Pierre Mohnen presented an empirical paper a joint work with George van Leeuwen to test the Porter Hypothesis (PH) with data of firms in the Netherlands. “Simply put”, began Pierre, “the hypothesis by Porter says that regulations are good since they make firms competitive by forcing them to be innovative thereby making them productive”.

Further studies divided the hypothesis to two, the “weak version” and the “strong version”. With the former, the hypothesis is the effect of environmental regulations on environmental innovations. The latter refers to the effect of environmental regulations on total factor productivity. Pierre applied the “Green type” CDM (Crépon-Duguet-Mairesse) model to a comprehensive data set built after matching four surveys; the survey on environmental costs of firms (ECF), the energy use survey (ES), the community innovation surveys (CIS) for 2002-2004, 2004-2006 and 2006-2008 and the production statistics survey (PS).

“Our findings strongly corroborate the weak version of PH in line with other similar studies” said Pierre emphatically. “Besides environmental investment subsidies and dependence of firms on energy use, marginal energy prices - including carbon taxes - are amongst the most important determinants of eco investment”. In their study, they also found that a significantly positive contribution of eco investment meant an elevated propensity of introducing environmental innovations. This led them to conclude that environmental considerations, either in the form of government regulations or in the form of market pressures are an important element in the decision making of firms investments in R&D or in eco-investments.