Multimedia Pollution Regulation and Environmental Performance: EPA’s Cluster Rule

In 1998 the US Environmental Protection Agency (EPA) promulgated its first integrated, multimedia (air and water) regulation, known as the Cluster Rule (CR), which aimed to reduce toxic releases from pulp and paper mills. By integrating the air and water regulations, EPA tried to reduce the overall regulatory burden on the affected plants. In this paper, we compare EPA’s ex ante expected reductions to an ex post assessment of those reductions. Using data from 1991 to 2009 for approximately 150 pulp and paper mills for both toxic and conventional pollutants, we find significant reductions in chloroform releases, nearly identical to the ex ante prediction of 99 percent reductions. We see some reductions in air toxics, smaller than the ex ante prediction and not always significant. Reductions in VOC emissions are similar in magnitude to the ex ante predictions for OLS models but smaller for fixed-effect models. No significant impact is found on PM10 emissions. We draw conclusions for regulatory impact analyses and retrospective analyses, including the importance of carefully identifying expected compliance methods and the potential sensitivity of these analyses to the definition of the baseline.