The Environmental Goods and Services Industry

This paper highlights the relationships between environmental policy and the structure of the environmental goods and services industry. It first provides a short history of the latter sector and briefly describes its main segments and economic trends. The impact of particular policy instruments, such as emission taxes and tradable permits, on key features of industry structure — notably the size and elasticity of demand, entry and exit of firms, horizontal mergers, firm asymmetry, and R&D levels, is then reviewed, together with their respective consequences on polluters' compliance costs. Conclusions are drawn and research questions are raised concerning the appropriate design of environmental policy and current trade negotiations on the liberalization of environmental services.