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‘Optimal’ Pollution Abatement – Whose Benefits Matter, and How Much?

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  • Wayne B. Gray
  • Ronald J. Shadbegian

Abstract

In this paper we examine the allocation of environmental regulatory effort across U.S. pulp and paper mills, looking at measures of regulatory activity (inspections and enforcement actions) and levels of air and water pollution from those mills. We combine measures of the marginal benefits of air and water pollution abatement at each mill with measures of the characteristics of the people living near the mill. This allows for the possibility that some people may count less in the calculations of regulators (and polluters), either because they have less political clout or because they live in another jurisdiction. We perform the analyses using a plant-level panel data set with approximately 300 pulp and paper mills from 1985-1997. We find support for the importance of both the benefits from pollution abatement and political factors related to the people affected, particularly related to the amount of air and water pollution being emitted. The results suggest substantial differences in the weights assigned to different types of people. In some models the benefits received by out-of-state people seem to count only half as much as benefits received in-state, but their weight increases if the bordering state’s Congressmen are strongly pro-environment. A few of these variables are also associated with greater regulatory activity being directed towards the plant, although those results are less consistent with our hypotheses than the pollution results. One set of results was consistently contrary to expectations: plants with more nonwhites nearby emit less pollution. Some of our results might be due to endogenous sorting of people based on pollution, but an attempt to examine this using the local population turnover rate found evidence of sorting for only one of four pollutants.

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File URL: http://yosemite.epa.gov/ee/epa/eed.nsf/WPNumber/2002-05/$File/2002-05.PDF
File Function: First version, 2002
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Bibliographic Info

Paper provided by National Center for Environmental Economics, U.S. Environmental Protection Agency in its series NCEE Working Paper Series with number 200205.

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Length: 44 pages
Date of creation: Sep 2002
Date of revision: Sep 2002
Handle: RePEc:nev:wpaper:wp200205

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Related research

Keywords: environmental justice; Environmental Regulation; Pollution Abatement Benefits; Transboundary Pollution;

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References

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  1. Ronald J. Shadbegian & Wayne B. Gray, 2003. "What Determines Environmental Performance at Paper Mills? The Roles of Abatement Spending, Regulation, and Efficiency," NCEE Working Paper Series 200303, National Center for Environmental Economics, U.S. Environmental Protection Agency, revised Apr 2003.
  2. Robin R. Jenkins & Kelly B. Maguire & Cynthia L. Morgan, 2004. "Host Community Compensation and Municipal Solid Waste Landfills," Land Economics, University of Wisconsin Press, vol. 80(4).
  3. Magat, Wesley A & Viscusi, W Kip, 1990. "Effectiveness of the EPA's Regulatory Enforcement: The Case of Industrial Effluent Standards," Journal of Law and Economics, University of Chicago Press, vol. 33(2), pages 331-60, October.
  4. Matthew E. Kahn, 1998. "The Silver Lining of Rust Belt Manufacturing Decline," Harvard Institute of Economic Research Working Papers 1828, Harvard - Institute of Economic Research.
  5. James T. Hamilton, 1995. "Testing for environmental racism: Prejudice, profits, political power?," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 14(1), pages 107-132.
  6. Mary E. Deily & Wayne B. Gray, 1989. "Enforcement of pollution regulations in a declining industry," Working Paper 8912, Federal Reserve Bank of Cleveland.
  7. James T. Hamilton, 1993. "Politics and Social Costs: Estimating the Impact of Collective Action on Hazardous Waste Facilities," RAND Journal of Economics, The RAND Corporation, vol. 24(1), pages 101-125, Spring.
  8. Nadeau, Louis W., 1997. "EPA Effectiveness at Reducing the Duration of Plant-Level Noncompliance," Journal of Environmental Economics and Management, Elsevier, vol. 34(1), pages 54-78, September.
  9. Seema Arora & Timothy N. Cason, 1999. "Do Community Characteristics Influence Environmental Outcomes? Evidence from the Toxics Release Inventory," Southern Economic Journal, Southern Economic Association, vol. 65(4), pages 691-716, April.
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