Abstract In this paper we use directional technology distance functions to evaluate the impact of environmental regulations on firms’ performance. Following Fa¨re et al. [Fa¨re, R., Grosskopf, S., Lovell, C.A.K., Pasurka, C., 1989. Multilateral productivity comparisons when some outputs are undesirable: a nonparametric approach. The Review of Economics and Statistics 71, 90–98.], we cons…