ABSTRACT
This chapter examines several key determinants of the interaction between foreign direct investment and European environmental policies. These comprise the emergence of sustainable development as a framework concept, the relationship of environmental factors to other location factors, the relevance of the 'industrial flight' hypothesis, the policy competition reflected in European governments' incentives for environmental technology and the growth of the environment industry in Europe. There is increasing strategic awareness of environment in the Community's Structural Funds, the regional policy package aimed at the EU's disadvantaged regions and which attracts one-third of the EU budget. Around 1980 environmental regulation did not feature highly as an international location factor in the research literature nor was it identified by foreign investors. Given that environmental issues appear to be increasing in importance and strategic awareness, potentially rising up the table of international location factors, it is worth considering whether the theory first advanced as the Industrial Flight Hypothesis may have new significance.
