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Covenants with weak swords: ISO 14001 and facilities' environmental performance

  • Matthew Potoski

    (Iowa State University)

  • Aseem Prakash

    (University of Washington)

Voluntary environmental programs are codes of progressive environmental conduct that firms pledge to adopt. This paper investigates whether ISO 14001, a voluntary program with a weak sword-a weak monitoring and sanctioning mechanism-can mitigate shirking and improve participants' environmental performance. Sponsored by the International Organization for Standardization (ISO), ISO 14001 is the most widely adopted voluntary environmental program in the world. Our analysis of over 3,000 facilities regulated as major sources under the U.S. Clean Air Act suggests that ISO 14001-certified facilities reduce their pollution emissions more than non-certified facilities. This result persists even after controlling for facilities' emission and regulatory compliance histories as well as addressing potential endogeneity issues between facilities' environmental performance and their decisions to join ISO 14001. © 2005 by the Association for Public Policy Analysis and Management

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File URL: http://hdl.handle.net/10.1002/pam.20136
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Article provided by John Wiley & Sons, Ltd. in its journal Journal of Policy Analysis and Management.

Volume (Year): 24 (2005)
Issue (Month): 4 ()
Pages: 745-769

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Handle: RePEc:wly:jpamgt:v:24:y:2005:i:4:p:745-769
Contact details of provider: Web page: http://www3.interscience.wiley.com/journal/34787/home

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  1. Khanna, Madhu & Damon, Lisa A., 1999. "EPA's Voluntary 33/50 Program: Impact on Toxic Releases and Economic Performance of Firms," Journal of Environmental Economics and Management, Elsevier, vol. 37(1), pages 1-25, January.
  2. Petra Christmann & Glen Taylor, 2001. "Globalization and the Environment: Determinants of Firm Self-Regulation in China," Journal of International Business Studies, Palgrave Macmillan, vol. 32(3), pages 439-458, September.
  3. Matthew E. Kahn, 2002. "Demographic change and the demand for environmental regulation," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 21(1), pages 45-62.
  4. Anna Alberini & Kathleen Segerson, 2002. "Assessing Voluntary Programs to Improve Environmental Quality," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 22(1), pages 157-184, June.
  5. Pargal, Sheoli & Wheeler, David, 1996. "Informal Regulation of Industrial Pollution in Developing Countries: Evidence from Indonesia," Journal of Political Economy, University of Chicago Press, vol. 104(6), pages 1314-27, December.
  6. Daron Acemoglu & Simon Johnson & James A. Robinson, 2001. "The Colonial Origins of Comparative Development: An Empirical Investigation," American Economic Review, American Economic Association, vol. 91(5), pages 1369-1401, December.
  7. Werner Antweiler & Kathryn Harrison, 2003. "Toxic release inventories and green consumerism: empirical evidence from Canada," Canadian Journal of Economics, Canadian Economics Association, vol. 36(2), pages 495-520, May.
  8. Eric W. Welch & Allan Mazur & Stuart Bretschneider, 2000. "Voluntary behavior by electric utilities: Levels of adoption and contribution of the climate challenge program to the reduction of carbon dioxide," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 19(3), pages 407-425.
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