ABSTRACT
This chapter looks at what effects the actual or imagined existence of inefficiently low or non-enforced environmental standards elsewhere might have on developed countries and their environmental standard setting. In accordance with much of the relevant literature, as the 'regulatory chill' hypothesis – that is, developed countries fail to raise standards over time because of feared capital flight. Enough evidence is there to warrant an evaluation of policy options to address the potential problem of 'regulatory chill'. The harmonization of standards and multilateral trade restrictions do relatively well on the criteria so that they are recommended as policy options to deal with potential 'regulatory chill' problems. Minimum standards as well as the harmonization of standards are not very restrictive in the sense that once the standards have been established, capital as well as goods and services are allowed to cross borders without constraint.
