The impact of environmental regulation and threats of regulation on environmental performance for Canadian firms

Environmental regulation in Canada suffers major changes, voluntary approaches are replaced with mandatory standards and regulations. Canada has a mixed regulatory system: federal environmental regulation combine or overlap with provincial regulation to encourage environmental innovative solution and pollution abatement. Following Canadian international commitments for sustainable development and fight against climate change, new guidelines, permits, agreements, authorizations, codes of practice, taxes and regulations are issued to insure a sustainable development of Canadian economy. These changes are deemed to reduce pollution and to enhance environmental performance of Canadian firms. This research investigates the evolution of environmental performance of Canadian firms and the impact of environmental regulation and threats of regulation on environmental innovation and environmental performance and provide insight on the gap between expectations and reality. We find empirical evidence of   a negative impact of changes in regulation and threat of regulation on the environmental performance at industry level. Environmental performance register important fluctuations and the changes in environmental regulation are not yet translated into better environmental performance. No association between environmental innovation and changes in regulation was found, new environmental regulation does not seem to stimulate industries to innovate. At country level, both environmental innovation and environmental performance follow the environmental regulation stringency.