Singh also backed the "polluter must pay" principle to deal with the issue of residual pollution that may be caused despite regulation.
"The central principle that must be enshrined in any sustainable development strategy is that incentives facing all economic decision makers must encourage them to act in a manner that is environmentally benign," he said inaugurating the Delhi Sustainable Development Summit 2011 here.
Singh`s remarks come in the wake of the environment ministry raising the red flag recently over several multi-billion dollar projects citing violation of green norms.
"We must put in place a structure of regulatory policies which will prevent potentially damaging behaviour. This is what we do by setting regulatory standards and enforcing them," he said.
"I must emphasise that standards are not enough. They must also be enforced which is often difficult," Singh said at the summit which was attended by Presidents of Afghanistan, Dominican Republic and Seychelles Hamid Karzai, Leonel Fernandez, and James Alix Michel respectively.
At the same time, Singh said it was necessary to ensure that the regulatory standards do not bring back the license permit raj which the government had got rid of in the wake of economic reforms of the early nineties.
To deal with the issue of residual pollution caused despite regulation, the Prime Minister emphasised on the polluter must pay principle.
"This will discourage the polluters and also provide a means of financing the corrective steps necessary to counter the pollution caused," he said.
Noting that India was setting standards for most energy consuming industries, Singh said "as a general rule we are trying to establish the principle that the polluter must pay though that is much more difficult to achieve in all cases".
He said last year, the government had introduced a cess of five per cent on the use of coal both domestic or imported to build the corpus of a National Clean Energy Fund.