Eco Laws "Push" Firms to Pollute Elsewhere.

• Position: THE ENVIRONMENT

Multinational companies headquartered in nations with tougher environmental policies tend to locate their polluting factories in countries with more lax regulations, a study at Ohio State University, Columbus, finds.

While countries may hope their regulations will reduce emissions of carbon dioxide and other greenhouse gases, these results show that these policies can lead to "carbon leakage" to other nations, indicates study coauthor Itzhak Ben-David, professor of finance.

"Firms decide strategically where to locate their production based on existing environmental policies, with the result being that they pollute more in countries with lenient regulations. This highlights the importance of worldwide collective action to combat climate change, given the global scale of firms' operations."

Researchers used a dataset covering 1,970 large public firms headquartered in 48 countries and their carbon dioxide emissions in 218 countries during a recent seven-year span. The database was provided by CDR a nonprofit...