Determinants of Environmental Compliance: Plant, Firm, and Enforcement Factors

EPA Grant Number: R828824
Title: Determinants of Environmental Compliance: Plant, Firm, and Enforcement Factors
Investigators: Gray, Wayne B. , Shadbegian, Ronald J.
Institution: Clark University
EPA Project Officer: Hahn, Intaek
Project Period: May 1, 2001 through April 30, 2004 (Extended to September 30, 2004)
Project Amount: $276,883
RFA: Corporate Environmental Performance and the Effectiveness of Government Interventions (2000) RFA Text |  Recipients Lists
Research Category: Environmental Justice


This study examines the determinants of environmental compliance with air and water pollution regulation for three industries: pulp and paper mills, petroleum refineries, and steel mills. The analysis uses data on the plant, its owning firm, and regulatory activity. We address four related questions: (1) What makes plants differ in their compliance and their sensitivity to enforcement activity? (2) How are compliance and emissions performance related, and how is compliance related across pollution media? (3) Does enforcement's effectiveness differ across states, or between state and federal regulators? (4) Do different statistical models give different results, comparing the determinants of compliance status, changes in compliance status, and duration of non-compliance?


The project begins with a sizable data collection effort, extending and updating an existing database. We use industry directories to generate a list of plants and to identify plant characteristics (location, capacity, production technology). The Compustat database provides data at the firm-level (employment, sales, profitability). Census Bureau datasets provide plant-level economic data (output, investment, productivity, and pollution abatement costs). Environmental compliance status and enforcement activity come from EPA regulatory datasets, and data on OSHA compliance is added for a cross-agency comparison.

Basic models allow the compliance decision to differ across plants and firms and to be influenced by enforcement. We consider more complete models which allow sensitivity to enforcement to vary across plants and across types of enforcement, and allow interactions in compliance across regulations. Several econometric techniques (logit, duration and transition models) are employed. We discuss the results with industry and regulatory people to check their plausibility and to develop further hypotheses for examination.

Expected Results:

We extend existing environmental compliance research: (1) by comparing results across industries and pollution media; (2) by explaining differences in economic and environmental performance and in sensitivity to enforcement using plant-level and firm-level data; and (3) by testing different statistical models to check robustness of results. The unique plant-level databases we create will also be useful for future researchers. Our results will help state (and federal) regulators allocate their limited enforcement resources more efficiently. Which plants are most likely to respond to enforcement? Which types of enforcement are most effective in encouraging compliance? Can compliance on one medium predict compliance on other media? Which definitions of compliance are most closely associated with improved environmental performance (lower emissions)? Answers to these questions should help regulators raise compliance levels and protect the environment.

Publications and Presentations:

Publications have been submitted on this project: View all 21 publications for this project

Journal Articles:

Journal Articles have been submitted on this project: View all 4 journal articles for this project

Supplemental Keywords:

Stationary sources, deterrence, social science, 2611, 2621, 2911, 3312., RFA, Economic, Social, & Behavioral Science Research Program, Scientific Discipline, Air, Sustainable Industry/Business, air toxics, Corporate Performance, Economics and Business, tropospheric ozone, Ecological Risk Assessment, Social Science, ownership status, enforcement strategy, policy making, stratospheric ozone, paper mills, environmental compliance determinants, petroleum refining, air & water pollution regulations, statistical model , corporate environmental behavior

Progress and Final Reports:

  • 2001 Progress Report
  • 2002 Progress Report
  • 2003
  • Final Report