Environmental Regulation and Productivity Benefits in the Paper IndustryEPA Grant Number: R826155
Title: Environmental Regulation and Productivity Benefits in the Paper Industry
Investigators: Gray, Wayne B. , Shadbegian, Ronald J.
Institution: Clark University
EPA Project Officer: Lee, Sonja
Project Period: October 1, 1997 through September 30, 2000
Project Amount: $300,000
RFA: Exploratory Research - Social Science (1997) RFA Text | Recipients Lists
Research Category: Economics and Decision Sciences
Description:This study uses plant-level data to examine the connection between environmental regulation and a broadly-defined measure of productivity for the U.S. paper industry, incorporating the benefits of emissions reduction as well as the costs of pollution abatement. The research allows us to address four related questions: (1) Have higher compliance costs at some plants been more than offset by correspondingly larger environmental benefits? (2) How has emissions reduction been achieved: through the installation of end-of-pipe control technologies or by other means? (3) Have environmental concerns influenced the choice of production technology for new facilities? (4) Have firms tended to shift production away from plants with especially serious environmental problems, and how has this affected industry productivity?
The project begins with a sizable data collection effort covering several hundred U.S. paper mills. We gather information on the production and abatement technologies used in each plant, including the dates of any modifications to the plant. This is merged with plant-level production and cost data from the Census's Longitudinal Research Database. Information on enforcement activity and compliance status is collected from EPA and state regulatory datasets. Finally, the plant's location is used to identify population density and distribution around the plant.
Each plant's production level and abatement techniques are used to compute its air and water emissions over time, benchmarked against actual emissions where possible. Estimates of health impacts from emissions are combined with population density to calculate the benefits from emissions reductions. These benefits are used to modify traditional productivity calculations, yielding a more complete measure of plant-level productivity.
Standard econometric techniques, including multiple regression, are used on the plant-level data to test the hypotheses under consideration. We also visit paper mills and discuss our research and conclusions with people from the paper industry and environmental regulators to ensure that the results from the statistical analyses are plausible, and to develop further hypotheses for examination.
Past studies of the impact of regulation on productivity have focussed almost exclusively on the costs of regulation, neglecting the benefits. The proposed research quantifies regulatory benefits in productivity terms, providing a more balanced picture of regulatory impacts. The models of the choice of production and abatement technologies developed here will assist regulators in forecasting industry responses to future regulatory changes. The unique plant-level database created here will also be useful for future research projects in related areas.