Monitoring Environmental Standards: Do Local Conditions Matter?
28 Pages Posted: 20 Apr 2016
Date Written: January 1997
Abstract
In deciding whether to inspect specific plants, regulators are sensitive to local environmental damages and, all things being equal, allocate more inspection efforts to plants whose emissions are likely to generate more damage. In other words, although national standards are uniform, local conditions affect the local monitoring and enforcement of national standards and effectively determine the price of pollution in each area.
Economists have criticized regulations that impose uniform environmental standards on plants that may face different marginal abatement costs and different marginal damage functions. Such critics ignore the significant difference in implementation of standards across plants, which gives rise to nonuniform standards.
Dion, Lanoie, and Laplante analyze what determines the regulators' monitoring activities and what factors explain their decision on whether to inspect a plant's environmental performance.
They find that in deciding whether to inspect specific plants, regulators are sensitive to local environmental damages and, all things being equal, allocate more inspection efforts to plants whose emissions are likely to generate more damage.
Although national standards (as defined by laws and regulations) are uniform, their implementation is a function of local conditions. Local monitoring and enforcement of national standards effectively determines the price of pollution in each area. Which means that, all things being equal, local enforcers could redirect resources in a way that approximates optimal behavior.
Ignoring the tradeoffs taking place locally could undermine and render ineffective regulatory and policy reform that is strictly national.
This finding supports the finding of Wang and Wheeler (Pricing Industrial Pollution in China, Policy Research Working Paper 1644, World Bank) that local enforcement of uniform national standards determines the effective price of pollution in each area. It supports the public interest theory of regulation, which views the regulator as an agent whose objective is to maximize social welfare.
On the other hand, Dion, Lanoie, and Laplante also show that the regulator's behavior is also a function of variables that may not be directly related to abatement cost and damages. In particular, they show that variables related to conditions in the local labor market affect the regulator's choice of monitoring strategy. This finding 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.
This paper - a product of the Environment, Infrastructure, and Agriculture Division, Policy Research Department - is part of the department's ongoing work on industrial pollution.
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
The Industrial Pollution Projection System
By Hemamala Hettige, Paul Martin, ...
-
Informal Regulation of Industrial Pollution in Developing Countries: Evidence from Indonesia
By David Wheeler and Sheoli Pargal
-
Controlling Industrial Pollution: A New Paradigm
By Shakeb Afsah, Benoît Laplante, ...
-
What Improves Environmental Performance? Evidence from Mexican Industry
By Susmita Dasgupta, David Wheeler, ...
-
Can Capital Markets Create Incentives for Pollution Control?
By Paul Lanoie, Benoît Laplante, ...
-
Globalization and the Environment: Determinants of Firm Self-Regulation in China
By Petra Christmann and Glen Taylor
-
Pollution and Capital Markets in Developing Countries
By Susmita Dasgupta, Benoît Laplante, ...
-
The Reputational Penalties for Environmental Violations: Empirical Evidence
By Jonathan M. Karpoff, John R. Lott, ...
-
Racing to the Bottom? Foreign Investment and Air Pollution in Developing Countries
-
Citizen Complaints as Environmental Indicators: Evidence from China
By David Wheeler and Susmita Dasgupta