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How Did Ontario Pulp and Paper Producers Respond to Effluent Regulations, 1985-89?

Listed author(s):
  • Joan Fearnley
  • Paul Lanoie
  • Mark Thomas
Registered author(s):

    This paper explores the effects of effluent regulatory activity on firm behavior in the pulp and paper industry in Ontario. The model uses instrumental variables to attempt to distinguish between that correlation between emission limits and emissions coming from regulatory capture and that coming from true influence on the part of the regulator. The model also attempts to identify the response channels on the part of the firms: data are available on reported investments in abatement capital and on firms' water consumption, correlated with output. Estimation results suggest that total suspended solids (TSS) limits were more effective than biological oxygen demand (BOD) limits in controlling emissions. Firm responses to TSS limits were in part through modulating output and these responses lowered emissions. In contrast, firms reported investing in abatement technology in response to reductions in BOD limits, but these reported investments had no discernible impact on emissions. Firm responses to court summons, fines, and inquiries were impossible to detect. Possible causes of these results are that penalties for effluent discharge infractions in Ontario during the period studied were too light to influence firm behavior measurably, and that emission limits are set high enough not to be binding for most firms in the sample. Cet article explore les effets de la réglementation des émissions de polluants sur les firmes de l'industrie ontarienne des pâtes et papier. Le modèle utilise des variables instrumentales pour faire la distinction entre les effets liés à la capture de l'agence de réglementation et des effets vraiment propres à l'action du régulateur. Le modèle cherche également à identifier les moyens utilisés par les entreprises pour faire face à la réglementation : des données sont disponibles pour les dépenses en équipement anti-pollution des entreprises et sur la quantité d'eau consommée. Les résultats tendent à démontrer que le contrôle des émissions polluantes se ferait de façon plus efficace par l'imposition d'une limite sur les rejets de matières en suspension (MES) que par une limite sur la demande biochimique en oxygène. Les effets constatés sur la firme d'une limite sur les MES, proviendraient en partie d'une modification dans la production, qui aurait pour effet de diminuer les émissions. Par contre, les investissements en équipement anti-pollution, consentis pour atteindre les objectifs de réduction de DBO, n'ont eu aucun effet sur les émissions. L'impact des poursuites légales, des amendes et des enquêtes est impossible à détecter. Parmi les causes possibles de ces résultats, notons que les sanctions imposées par l'Ontario aux entreprises lors d'une infraction sur l'émission de polluant, durant la période d'étude, étaient trop faibles pour influencer de façon mesurable le comportement des entreprises. Une autre cause pourrait être le fait que les limites d'émissions sont assez élevées pour ne pas être contraignantes pour la plupart des firmes de l'échantillon.

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    Paper provided by CIRANO in its series CIRANO Working Papers with number 96s-25.

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    Length: 30 pages
    Date of creation: 01 Oct 1996
    Handle: RePEc:cir:cirwor:96s-25
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    References listed on IDEAS
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    1. Marin, Alan, 1991. "Firm incentives to promote technological change in pollution control: Comment," Journal of Environmental Economics and Management, Elsevier, vol. 21(3), pages 297-300, November.
    2. Milliman, Scott R. & Prince, Raymond, 1992. "Firm incentives to promote technological change in pollution control: Reply," Journal of Environmental Economics and Management, Elsevier, vol. 22(3), pages 292-296, May.
    3. Laplante, Benoit & Rilstone, Paul, 1996. "Environmental Inspections and Emissions of the Pulp and Paper Industry in Quebec," Journal of Environmental Economics and Management, Elsevier, vol. 31(1), pages 19-36, July.
    4. 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 331-360, October.
    5. Milliman, Scott R. & Prince, Raymond, 1989. "Firm incentives to promote technological change in pollution control," Journal of Environmental Economics and Management, Elsevier, vol. 17(3), pages 247-265, November.
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