In this paper I address suggestions made by some researchers that environmental regulators respond to firms' voluntary pollution control efforts through more favorable enforcement conditions. From a theoretical perspective, I show that a firm's environmental investment behavior does indeed cause a budget-constrained regulator to divert its enforcement efforts toward other firms. This places firms in a prisoners dilemma whereby each has an incentive to impose increased monitoring costs on the other. In addition, I present some empirical evidence that confirms the model's primary implications. I find that a firm can in fact influence its (and its competitor's) current-year share of environmental enforcement activity by generating less (unregulated) pollution per unit output in previous years.