Environmental inspections and emissions of the pulp and paper industry : the case of Quebec

Since the early 1970s, industrial countries have enacted (or amended) many environmental laws and regulations to control and improve air and water quality. Developing countries are increasingly enacting similar legislation. But imposing a ceiling on a plant's emissions does not guarantee reduced emissions or an improved environment. Ensuring the attainment of the regulation's objectives requires monitoring the behavior of the regulated facility and enforcing environmental standards. Most of the literature in environmental economics is theoretical and simply assumes that polluters comply with regulations. Although monitoring and enforcement problems are clearly a pitfall of environmental regulation, little empirical work has been done about the effect of current monitoring strategies on pollution emissions. The authors supply an empirical framework for measuring the impact of environmental inspections on plant emissions. They apply it to pulp and paper plants in Quebec for which reliable data were available. The results suggest that both inspection and the threat of inspections reduce pollution emissions. They also show that a plant's decision whether to report its emissions levels to the regulator is not random. Inspections improve the frequency of reporting.Sanitation and Sewerage,Water and Industry,Environmental Economics&Policies,Water Conservation,Wetlands,Insurance&Risk Mitigation,Water and Industry,Environmental Economics&Policies,Sanitation and Sewerage,TF030632-DANISH CTF - FY05 (DAC PART COUNTRIES GNP PER CAPITA BELOW USD 2,500/AL

Environmental policy and time consistency - emissions taxes and emissions trading

The authors examine policy problems related to the use of emissions taxes, and emissions trading, two market-based instruments for controlling pollution by getting regulated firms to adopt cleaner technologies. By attaching an explicit price to emissions, these instruments give firms an incentive to continually reduce their volume of emissions. Command, and-control emissions standards create incentives to adopt cleaner technologies only up to the point where the standards are no longer binding (at which point the shadow price on emissions falls to zero). But the ongoing incentives created by the market-based instruments are not necessarily right, either. Time-consistency constraints on the setting of these instruments limit the regulator's ability toset policies that lead to efficiency in adopting technology options. After examining the time-consistency properties of a Pigouvian emissions tax, and of the emissions trading, the authors find that: 1) If damage is linear, efficiency in adopting technologies involves either universal adoption of the new technology, or universal retention of the old technology, depending on the cost of adoption. The first best tax policy, and the first-best permit-supply policy are both time-consistent under these conditions. 2) If damage is strictly convex, efficiency may require partial adoption of the new technology. In this case, the first-best tax policy is not time-consistent, and the tax rate must be adjusted after adoption has taken place (ratcheting). Ratcheting will induce an efficient equilibrium if there is a large number of firms. If there are relatively few firms, ratcheting creates too many incentives to adopt the new technology. 3) The first-best supply policy is time-consistent if there is a large number of firms. If there are relatively few firms, the first-best supply policy may not be time-consistent, and the regulator must ratchet the supply of permits. With this policy, there are not enough incentives for firms to adopt the new technology. The results do not strongly favor one policy instrument over the other, but if the point of an emissions trading program is to increase technological efficiency, it is necessary to continually adjust the supply of permits in response to technological change, even when the damage is linear. This continual adjustment is not needed for an emissions tax when damage is linear, which may give emissions taxes an advantage over emissions trading.General Technology,Environmental Economics&Policies,International Terrorism&Counterterrorism,Technology Industry,ICT Policy and Strategies,Environmental Economics&Policies,General Technology,International Terrorism&Counterterrorism,Carbon Policy and Trading,Energy and Environment

Equilibrium incentives for adopting cleaner technology under emissions pricing

Policymakers sometimes presume that adopting a less polluting technology necessarily improves welfare. This view is generally mistaken. Adopting a cleaner technology is costly, and this cost must be weighed against the technology's benefits in reduced pollution and reduced abatement costs. The literature to date has not satisfactorily examined whether emissions pricing properly internalizes this tradeoff between costs and benefits. And if the trend toward greater use of economic instruments in environmental policy continues, as is likely, the properties of those instruments must be understood, especially for dynamic efficiency. The authors examine incentives for adopting cleaner technologies in response to Pigouvian emissions pricing in equilibrium (unlike earlier analyses, which they contend, have been generally incomplete and at times misleading). Their results indicate that emissions pricing under the standard Pigouvian rule leads to efficient equilibrium adoption of technology under certain circumstances. They show that the equilibrium level of adopting a public innovation is efficient under Pigouvian pricing only if there are enough firms that each firm has a negligible effect on aggregate emissions. When those circumstances are not satisfied, Pigouvian pricing does not induce an efficient (social welfare-maximizing) level of innovation. The potential for inefficiency stems from two problems with the Pigouvian rule. First, the Pigouvian price does not discriminate against each unit of emissions according to its marginal damage. Second, full ratcheting of the emissions price in response to declining marginal damage as firms adopt the cleaner technology is correct expost but distorts incentives for adopting technology ex ante. The next natural step for research is to examine second-best pricing policies or multiple instrument policies. The challenge is to design regulatory policies that go some way toward resolving problems yet are geared to implementation in real regulatory settings. Clearly, such policies must use more instruments than emissions pricing alone. Direct taxes or subsidies for technological change, together with emissions pricing, should give regulators more scope for creating appropriate dynamic incentives. Such instruments are already widely used: investment tax credits (for environmental research and development), accelerated depreciation (for pollution control equipment), and environmental funds (to subsidize the adoption of pollution control equipment). Such direct incentives could be excessive, however, if emissions pricing is already in place. All incentives should be coordinated.Public Health Promotion,Environmental Economics&Policies,Health Monitoring&Evaluation,General Technology,International Terrorism&Counterterrorism,International Terrorism&Counterterrorism,Carbon Policy and Trading,Environmental Economics&Policies,Health Monitoring&Evaluation,General Technology

Capital markets responses to environmental performance in developing countries

Firms in developing countries are often said to have no incentives to invest in pollution control because they typically face weak monitoring and enforcement of environmental regulations. But the inability of formal institutions to control pollution through fines and penalties may not be as serious an impediment to pollution control as is generally argued, contend the authors. Capital markets may react negatively to news of adverse environmental incidents (such as spills or violations of permits) as well as positively to the announcement that a firm is using cleaner technologies. The authors assess whether capital markets in Argentina, Chile, Mexico, and the Philippines react to the announcement of firm-specific environmental news. They show that: I) Capital markets react positively ( the firms'market value increases) to the announcement of rewards and explicit recognition of superior environmental performance. ii) They react negatively (the firms'value decreases) to citizens'complaints. Environmental regulators in developing countries could 1) harness market forces by introducing structured programs to release firm-specific information about environmental performance, and 2) empower communities and stakeholders through environmental education programs.Microfinance,Water and Industry,Small and Medium Size Enterprises,Environmental Economics&Policies,Small Scale Enterprise,Water and Industry,Agricultural Research,Small Scale Enterprise,Private Participation in Infrastructure,Environmental Economics&Policies

Accounting for toxicity risks in pollution control : does it matter?

The accounting and public release of information about industrial toxic pollution emissions is meeting increasing criticism in that these listings typically do not account for the different toxicity risks associated with different pollutants. A firm emitting a large amount of relatively harmless substance is ranked as a heavier polluter than a firm emitting a small quantity of a potent substance. Such"unweighted"rankings of firms, it is argued, may lead to misallocation of resources and a wrong prioritization of efforts in pollution control. This is a particular problem in developing countries, where sources for pollution control are typically scarce. To account for varying toxicity risk, a number of organizations have developed thresholds or exposure limits for various pollutants. But many toxicity risk factors and methods are currently available, and different risk indicators yield different results and hence priorities. So the authors review seven risk methods and construct 10 sets of toxicity risk factors from those indicators. They apply those factors to the 3,426 industrial municipalities of Brazil and explore Rio de Janeiro and Sao Paulo in detail. After ranking states and municipalities for their pollution intensity, results indicate that at the state level, risk-weighted rankings remain largely the same across the 10 sets of toxicity risk factors used in thispaper. By and large the result also holds true at the municipal level. Although at the state level the unweighted ranking is relatively similar to the risk-weighted ranking, at the municipal level significant differences were found between the risk-weighted and unweighted rankings. These findings suggest that it is important for environmental regulators to weight pollutants for their relative toxicity risk when developing priorities for pollution control efforts at the industrial or regional level. But at high levels of aggregation, the choice of indicator need not be the subject of immense debate.Public Health Promotion,Environmental Economics&Policies,Health Monitoring&Evaluation,Pollution Management&Control,Water and Industry,Health Monitoring&Evaluation,TF030632-DANISH CTF - FY05 (DAC PART COUNTRIES GNP PER CAPITA BELOW USD 2,500/AL,Sanitation and Sewerage,Water and Industry,Environmental Economics&Policies

Monitoring environmental standards : do local conditions matter?

Economists have criticized regulations that impose uniform environmental standards on plants that may face different marginal abatement costs and damage functions. Such critics ignore the difference in standard implementation across plants, giving rise to nonuniform standards. The authors analyze what determines the regulators'monitoring activities and what factors explain their decision to inspect a plant's environmental performance. They find that regulators are sensitive to local environmental damages and allocate inspection efforts to plants whose emissions are likely to generate more damage. Although national standards are uniform, implementation is a function of local conditions. Local monitoring and enforcement of national standards effectively determines the local price of pollution. Ignoring the tradeoffs taking place locally could undermine and render ineffective national regulatory and policy reform. This supports the public interest theory of regulation, which views the regulator as an agent whose objective is to maximize social welfare. The authors also show that the regulator's behavior is a function of variables not directly related to abatement cost and damages. In particular, conditions in the local labor market affect the regulator's monitoring strategy choice. This lends support to the economic theory of regulation, which views regulators as agents whose behavior can best be explained by assuming that they seek to maximize their political support.Administrative&Regulatory Law,Environmental Economics&Policies,Labor Policies,Health Economics&Finance,Economic Theory&Research,Environmental Economics&Policies,Environmental Governance,Administrative&Regulatory Law,Health Economics&Finance,Water and Industry

Monitoring of Pollution Regulation: Do Local Conditions Matter

Economists have greatly criticized regulations that impose uniform environmental standards on plants which may differ in terms both of their marginal abatement cost and marginal damage functions. Such a critic ignores however that the implementation of the standards may vary significantly across plants thus giving rise in fact to non-uniform standards. The purpose of this paper is to analyze the determinants of the regulator's monitoring activities, and the factors which explains the decision to inspect or not to inspect a plant's environmental performance. We show that regulators are sensitive to environmental damages in their decision to inspect specific plants and that greater inspection effort, ceteris paribus, is allocated towards those plants whose emissions are likely to generate a higher level of damages. On the other hand, we also show that the behavior of the regulator is also a function of variables that may not be directly related to abatement cost and damages. In particular, we show that variables pertaining to local labor market conditions have an impact on the monitoring strategy adopted by the regulator. These results provide support to both the public interest and economic theory of regulation. Les économistes ont beaucoup critiqué la réglementation qui impose des normes environnementales uniformes à des usines qui peuvent différer tant en termes de coûts marginaux de la diminution de la pollution qu'en termes des fonctions de dommage marginal. De tels critiques ignorent toutefois que l 'implantation de normes peut varier de manière significative d'une usine à l'autre, ce qui se traduit par des normes qui, en fait, ne sont pas uniformes. Le but de cet article est d'analyser les déterminants des activités de contrôle du législateur, et les facteurs qui expliquent la décision d'inspecter ou non la performance environnementale d'une usine. Nous démontrons que les législateurs sont sont sensibles aux dommages environnementaux lorsqu'ils prennent la décision d'inspecter une usine spécifique et que de plus grands efforts d'inspection, ceteris paribus, sont consacrés aux usines qui sont susceptibles de créer les dommages les plus importants. D'un autre côté, nous démontrons également que les comportements du législateur sont aussi fonction de variables qui ne peuvent être reliées directement aux coûts de la réduction de la pollution et aux dommages environnementaux. En particulier, nous démontrons que les variables liées aux conditions locales du marché du travail ont un impact sur la stratégie de contrôle adoptée par le législateur. Ces résultats fournissent un support, à la fois à la théorie de l'intérêt public, et à la théorie économique de la réglementation.Pollution, Environment, Monitoring, Enforcement, Regulation, Pulp and Paper, Pollution, Environnement, Contrôle, Réglementation, Pâte et papier

Environment as cultural heritage: the Armenian diaspora's willingness-to-pay to protect Armenia's Lake Sevan

This paper presents a study of willingness-to-pay of the Armenian Diaspora in the United States to protect Armenia's Lake Sevan, a unique and precious symbol of the Armenian cultural heritage. Dichotomous choice contingent valuation questions were asked by mail surveys to elicit respondents'willingness to pay for the protection of Lake Sevan. The results show that on average, each household of the Armenian Diaspora in the United States would be willing to provide a one-time donation of approximately US$80 to prevent a further degradation of Lake Sevan, and approximately US$280 to restore the quality of the lake by increasing its water level by 3 meters.Water Conservation,Cultural Heritage&Preservation,Public Health Promotion,Environmental Economics&Policies,Decentralization,Health Economics&Finance,Water Use,Health Monitoring&Evaluation,Environmental Economics&Policies,Water Conservation

Environmental Performance of Canadian Pulp and Paper Plants: Why Some Do Well and Others Do Not ?

It is generally recognized that firms face both internal and external pressure to improve their environmental performance. However, few studies have attempted to delineate the importance of those various sources of pressure as firms' managers themselves perceive them. In this study, we show that managers in the Canadian pulp and paper industry perceive government and public, but not financial and consumer markets, as the most important source of pressure. We also show that involvement of the firm's higher level management and environmental education of employees are important determinants of the firm's performance. While the paper provides a better understanding of the determinants of environmental performance, it re-asserts the crucial role of strong government regulatory intervention. Il est généralement reconnu que les firmes font face à des pressions internes et externes pour qu'elles améliorent leur performance environnementale. Cependant, peu d'études ont tenté d'identifier l'importance de ces différentes sources de pression tel que les gestionnaires les perçoivent. Dans cette étude, nous montrons que les directeurs «environnement» de l'industrie canadienne des pâtes et papiers perçoivent le gouvernement et le public comme les sources de pression les plus importantes, devant les marchés financiers et les consommateurs. Nous montrons également que l'implication de la haute direction à l'égard de l'environnement et la formation des employés par rapport à la problématique environnementale sont des déterminants importants de la performance environnementale. Cette recherche nous aide donc à mieux comprendre les déterminants de la performance environnementale et elle permet de réaffirmer le rôle crucial joué par une intervention gouvernementale vigoureuse dans le domaine.Environmental performance, Environmental policy, Environmental audit, Performance environnementale, Politique environnementale, Audit environnementalhttp://www.google.ca/search?q=comparaison+jet+d%27encre&hl=en&lr=&ie=UTF-8&start=40&sa=N

Incentives for pollution control - regulation and public disclosure

An increasing number of regulators have adopted public disclosure programs to create incentives for pollution control. Previous empirical analyses of monitoring and enforcement issues have focused strictly on the impact of such traditional practices as monitoring (inspections) and enforcement (fines and penalties) on polluters'environmental performance. Other analyses have separately focused on the impact of public disclosure programs. But can these programs create incentives in addition to the normal incentives of fines and penalties? The authors study the impact of both traditional enforcement and information strategies in the context of a single program, to gain insights into the relative impact of traditional (fines and penalties) and emerging (public disclosure) enforcement strategies. Their results suggest that the public disclosure strategy adopted by the province of British Columbia, Canada, has a greater impact on both emission levels and compliance status than do orders, fines, and penalties traditionally imposed by the courts and the Ministry of the Environment. But their results also demonstrate that adopting stricter standards and higher penalties also significantly affected emission levels. Policymakers, take note: 1) The presence of strong, clear standards together with a significant, credible penalty system sends appropriate signals to the regulated community, which responds by lowering pollution emissions. 2) The public disclosure of environmental performance creates strong additional incentives to control pollution.Public Health Promotion,Water and Industry,Water Conservation,Environmental Economics&Policies,Health Monitoring&Evaluation,Environmental Economics&Policies,Water and Industry,Health Monitoring&Evaluation,Sanitation and Sewerage,TF030632-DANISH CTF - FY05 (DAC PART COUNTRIES GNP PER CAPITA BELOW USD 2,500/AL