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Big field, small potatoes: An empirical assessment of EPA's self-audit policy

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Author Info
Alexander () (Columbia University - Department of International & Public Affairs)
Chris William Sanchirico () (Columbia University - Department of Economics)
John Lee () (Columbia University - Department of Economics)
Daniel Prager () (University of Pennsylvania Law School)

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Abstract

Environmental self-auditing by private firms is generally thought to both deserve and require encouragement. Firms can audit themselves more cheaply and effectively than can regulators, but too often are deterred for fear that the information they uncover will be used against them. To reduce this disincentive, the EPA's "Audit Policy" lowers punitive fines when firms promptly disclose and correct violations that they themselves discover. While some contend that the Audit Policy is inadequate, EPA touts its success, presenting as evidence the policy's track record to date. Yet our examination of that track record leads us to question EPA's conclusions. While the policy appears to have encouraged firms to self-audit in a number of instances, a comparison of the violations uncovered in these cases with those detected by standard enforcement practices suggests that the typical self-audited violation is relatively minor. For instance, cases arising under the Audit Policy are more likely to concern reporting violations, rather than emissions. The relative insignificance of self-audited violations raises a number of broader policy questions, including whether the Audit Policy could and should be revised to play a larger role in regulatory enforcement.

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Paper provided by Columbia University, Department of Economics in its series Discussion Papers with number 0102-55.

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Length: 35 pages
Date of creation: 2002
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Handle: RePEc:clu:wpaper:0102-55

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Arlen, Jennifer, 1994. "The Potentially Perverse Effects of Corporate Criminal Liability," Journal of Legal Studies, University of Chicago Press, vol. 23(2), pages 832-67, June.
  2. Innes, Robert, 2000. "Self-Reporting in Optimal Law Enforcement When Violators Have Heterogeneous Probabilities of Apprehension," Journal of Legal Studies, University of Chicago Press, vol. 29(1), pages 287-300, January.
  3. Robert Innes, 1999. "Self-Policing and Optimal Law Enforcement When Violator Remediation is Valuable," Journal of Political Economy, University of Chicago Press, vol. 107(6), pages 1305-1325, December. [Downloadable!] (restricted)
  4. Arora Seema & Cason Timothy N., 1995. "An Experiment in Voluntary Environmental Regulation: Participation in EPA's 33/50 Program," Journal of Environmental Economics and Management, Elsevier, vol. 28(3), pages 271-286, May. [Downloadable!] (restricted)
  5. Linda T. M. Bui & Christopher J. Mayer, 2003. "Regulation and Capitalization of Environmental Amenities: Evidence from the Toxic Release Inventory in Massachusetts," The Review of Economics and Statistics, MIT Press, vol. 85(3), pages 693-708, December. [Downloadable!] (restricted)
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  6. Pargal, Sheoli & Wheeler, David, 1995. "Informal regulation of industrial pollution in developing countries : evidence from Indonesia," Policy Research Working Paper Series 1416, The World Bank. [Downloadable!]
  7. Kaplow, Louis & Shavell, Steven, 1994. "Optimal Law Enforcement with Self-Reporting of Behavior," Journal of Political Economy, University of Chicago Press, vol. 102(3), pages 583-606, June. [Downloadable!] (restricted)
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  8. Hartman, Raymond S. & Huq, Mainul & Wheeler, David, 1997. "Why paper mills clean up : determinants of pollution abatement in four Asian countries," Policy Research Working Paper Series 1710, The World Bank. [Downloadable!]
  9. Dasgupta, Susmita & Wheeler, David, 1997. "Citizen complaints as environmental indicators : evidence from China," Policy Research Working Paper Series 1704, The World Bank. [Downloadable!]
  10. Shavell, Steven, 1992. "Liability and the Incentive to Obtain Information about Risk," Journal of Legal Studies, University of Chicago Press, vol. 21(2), pages 259-70, June.
  11. Pfaff, Alexander S P & Sanchirico, Chris William, 2000. "Environmental Self-Auditing: Setting the Proper Incentives for Discovery and Correction of Environmental Harm," Journal of Law, Economics and Organization, Oxford University Press, vol. 16(1), pages 189-208, April.
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  1. Sarah L. Stafford, 2006. "Should You Turn Yourself In? The Consequences of Environmental Self-Policing," Working Papers 27, Department of Economics, College of William and Mary, revised 13 Jun 2006. [Downloadable!]
  2. Guerrero, Santiago & Innes, Robert, 2008. "Statutory Rewards to Environmental Self-Auditing: Do They Reduce Pollution and Save Regulatory Costs? Evidence from a Cross-State Panel," 2008 Annual Meeting, July 27-29, 2008, Orlando, Florida 6204, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association). [Downloadable!]
  3. James J. Murphy & John K. Stranlund, 2005. "An Investigation of Voluntary Discovery and Disclosure of Environmental Violations Using Laboratory Experiments," Working Papers 2005-7, University of Massachusetts Amherst, Department of Resource Economics. [Downloadable!]
  4. Sarah L. Stafford, 2006. "Self-Policing in a Targeted Enforcement Regime," Working Papers 26, Department of Economics, College of William and Mary. [Downloadable!]
  5. Alfredo Burlando & Alberto Motta, 2007. "Self Reporting reduces corruption in law enforcement," "Marco Fanno" Working Papers 0063, Dipartimento di Scienze Economiche "Marco Fanno". [Downloadable!]
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