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Compliance in environmental markets

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  • Lata Gangadharan

Abstract

One of the reasons given for compliance with environmental programmes is that firms want to project an environmentally friendly image, as this would have a positive effect on their sales and eventually on their market share. This paper tries to test the effect of environmental friendliness on compliance behaviour using data from a tradable emissions programme currently running in Los Angeles. A large fraction of the firms comply with the environmental regulations. To study the reasons for this compliance behaviour, variables are created that represent the environmentally friendly characteristics of the firms. These variables are: how close the firm is to the final consumer and whether the firm has employed a manager to look after its environmental policies. Of all the firm characteristics, the capital level of the firm is seen to be significant in explaining non-compliance. Contrary to expectations, the environmental friendliness variables do not have significant explanatory power. Environmental consciousness as an explanatory variable for compliance therefore needs to be reconsidered in this kind of a pollution prevention programme.

Suggested Citation

  • Lata Gangadharan, 2001. "Compliance in environmental markets," Applied Economics Letters, Taylor & Francis Journals, vol. 8(10), pages 641-644.
    • Handle: RePEc:taf:apeclt:v:8:y:2001:i:10:p:641-644
    DOI: 10.1080/13504850010029192
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    References listed on IDEAS

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    1. Harrington, Winston, 1988. "Enforcement leverage when penalties are restricted," Journal of Public Economics, Elsevier, vol. 37(1), pages 29-53, October.
    2. Seema Arora & Timothy N. Cason, 1996. "Why Do Firms Volunteer to Exceed Environmental Regulations? Understanding Participation in EPA's 33/50 Program," Land Economics, University of Wisconsin Press, vol. 72(4), pages 413-432.
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    Cited by:

    1. Gangadharan, Lata, 2006. "Environmental compliance by firms in the manufacturing sector in Mexico," Ecological Economics, Elsevier, vol. 59(4), pages 477-486, October.

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    More about this item

    JEL classification:

    • Q25 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Water
    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy

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