Determinants of Environmental Compliance: Plant, Firm, and Enforcement FactorsEPA 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
Description: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?
Approach: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.