Competitive Distortions in EU Environmental Legislation: Inefficiency versus Inequity

In the European Union a number of emission standards for stationary sources have been harmonised. For many years the legal basis has been article 100 EEC (renumbered as article 94 by the Amsterdam Treaty), which calls for harmonisation to eliminate and prevent distortions of competition in the common market. In the paper, two views of ‘distortion of competition’ are distinguished: either as an inefficiency in the allocation of resources or as an inequity of starting conditions. At first sight, the inequity interpretation seems to have been the primary motive for harmonising source emission standards. However, a closer investigation reveals that actual harmonisation policies also partly reflect the ‘inefficiency’ view. Implicitly, the harmonisation policies of the EU may trade off efficiency and equity.