The Comparative Effectiveness of Government Interventions on Environmental Performance in the Chemical Industry

Abstract

Effective enforcement is crucial to achieving the objectives of the federal environmental statutes. The federal Environmental Protection Agency (EPA) has recognized the importance of effective enforcement, calling it a critical aspect of environmental governance and committing itself to the maintenance of a "credible deterrent" to regulatory violations. Despite the central role of enforcement to achievement of environmental statutory goals, relatively little is known about why regulated entities either do or do not comply. In particular, empirical studies of environmental enforcement are not plentiful, in part because comprehensive data on compliance and enforcement have been difficult to obtain. Although EPA and state environmental agencies typically assume that rigorous enforcement will deter noncompliance, some environmental law experts have asserted that available evidence suggests that sanctions do not play a major role in inducing compliance with environmental regulations. Even assuming that government enforcement efforts do generally induce regulated firms to improve their performance, relatively little is known about what kinds of enforcement actions are more effective at deterring noncompliance than others. Perhaps for these reasons, EPA has expressed an interest in learning more about the relative effectiveness of different forms of "government interventions" (including inspections, monetary fines, injunctive relief sanctions, and supplemental environmental projects) on the performance of regulated entities. EPA has stated, for example, that empirical research on the comparative effectiveness of these interventions is critical because it will create data sources needed to assess the degree to which each of the interventions affects environmental performance. This article responds to the need for additional insights into the comparative effectiveness of government interventions on the environmental performance of regulated entities by focusing on facilities in the chemical industry that are regulated under the federal Clean Water Act (CWA). The article assesses whether some interventions are likely to be more or less effective than others in improving environmental performance on the basis of two related analyses. First, the article analyzes the effects of specific deterrence, as stemming from actual interventions, and general deterrence, as stemming from the threat of interventions, on the level of discharges relative to facility-specific effluent limitations. Second, the article analyzes the self-reported perceptions of intervention efficacy provided as responses to a survey administered to facilities in the same industry. The article describes our findings on the comparative effectiveness of government interventions on the performance of point sources in the chemical industry subject to CWA permit requirements, and places those findings in the context of the theoretical literature on environmental compliance and previous empirical studies on the effects of government interventions on environmental performance.

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