Environmental Regulation and Competition

Competition and environmental policies are complementary. They seek to correct market failures and enhance social welfare. Environmental regulations can, however, reduce competition in markets through diverse channels, raising prices for consumers. They may create barriers to entry in particular markets and increase concentration. Environmental regulation can also give rise to anticompetitive practices. The regulations can be misused in predatory schemes to exclude or disadvantage rivals and also to facilitate price-fixing and other collusive schemes. Competition authorities take environmental regulations into account in their everyday work but do not provide special consideration for environmental impacts or environmental overrides. Environmental policies should be designed to achieve their aims without unnecessary restrictions of competition. Competition authorities should help environmental agencies and legislatures to find ways to achieve environmental objectives that restrict competition as little as possible. This document comprises proceedings in the original languages of a Roundtable on Environmental Regulation and Competition, held by the Competition Committee in June 2006.