Climate policy, environmental performance, and profits.

In this study we investigate how firm level environmental performance ( EP) affects firm level economic performance measured as profit efficiency ( PE) in a stochastic profit frontier setting. Analyzing firms in Swedish manufacturing 1990-2004, results show that EP induced by environmental policy is not a determinant of PE, while voluntary or market driven EP seem to have a significant and positive effect on firm PE in most sectors. The evidence generally supports the idea that good EP is also good for business, as long as EP is not brought on by policy measures, in this case a CO tax. Thus, the results provide no general support for the Porter hypothesis. [ABSTRACT FROM AUTHOR]