In today's global economy, assessing costs of compliance is crucial to understand how environmental regulations infl uence fi rms' behaviour and in particular their ability to compete at an international level. A three step methodology is used to conduct a comparison of Scotland's industry with the international community. The fi rst step compares environmental protection expenditures among the European Community. The second step uses the Environmental Regulatory Regime Index developed by Porter and Esty to compare regulatory quality among 71 nations. The fi nal step compares Scotland's environmental quality with the international community based on three criteria: SO 2 , PM 10 and energy effi ciency. Relative to the countries used in this research, Scotland is found to have a high quality regulatory regime, low costs of compliance for industry and a mixture of moderate to high environmental quality. Because signifi cant defi ciencies exist in the data, some uncertainties remain in the results. Published in 2007 with the permission of the Controller of Her Majesty's Stationery Offi ce and the Queen's Printer for Scotland.