Jay P. Shimshack

The Effectiveness of Environmental Monitoring and Enforcement: A Review of the Empirical Evidence

Regulatory punishment for pollution violations is a mainstay of nearly every industrialized nations environmental policy. This article reviews the existing empirical evidence on the impacts of environmental monitoring and enforcement actions. We first provide context by investigating the U.S. regulatory setting. We then briefly discuss how economists think about environmental enforcement. We next consider recent empirical evidence linking regulator actions to subsequent pollution discharges and compliance behavior. Since the literature primarily studies U.S. institutions, our review focuses mainly on the effects of Environmental Protection Agency and U.S. state activities. The consistent findings from this literature review are as follows: (1) environmental monitoring and enforcement activities generate substantial specific deterrence, reducing future violations at the targeted firm; (2) environmental monitoring and enforcement activities generate substantial general deterrence, reducing future violations at facilities other than the targeted one; and (3) environmental monitoring and enforcement activities generate not only reductions in violations but also significant reductions in emissions. We conclude by discussing policy implications and identifying gaps in the current state of knowledge.

Effects of the Private-Label Invasion in Food Industries

Using supermarket scanner data, we test a variety of hypotheses from trade journals about the invasion of private-label food products. According to conventional industry wisdom, name-brand firms defended their brands against new private-label products by lowering their prices, engaging in additional promotional activities, and increasingly differentiating their products. Our empirical evidence is inconsistent with these beliefs.

Information Disclosure Policies: Evidence from the Electricity Industry

A “third wave” of environmental policy has recently emerged that emphasizes information provision as an integral part of the risk mitigation strategy. While theory suggests information programs may correct market failures and improve welfare, the empirical effectiveness of these programs remains largely undetermined. We show that mandatory information disclosure programs in the electricity industry achieve stated policy goals. We that the average proportion of fossil fuels decreases and the average proportion of clean increases in response to disclosure programs. However, the programs also produce unintended consequences. Customer composition and pre-existing fuel mix significantly affect program response, suggesting that effective information disclosure policies may not be efficient.

Mercury advisories and household health trade-offs

The conventional economic wisdom is that improving consumer information will enhance welfare. Yet, some scientists speculate that the Food and Drug Administrations prominent mercury in fish advisory may have harmed public health. Lower mercury intakes reduce neurological toxicity risks. However, since seafood is the predominant dietary source of healthful omega-3 fatty acids, reduced fish consumption may have significant offsetting health impacts. We explore this risk trade-off using a rich panel of household-level seafood consumption data. To control for confounding factors, we use a non-parametric changes-in-changes approach. We find strong evidence that while the advisory reduced mercury loadings, it did so at the expense of substantial reductions in healthful omega-3s. We find this response pattern even for consumers with low fish consumption. Using advisory response patterns as inputs into a prominent risk assessment model, the central estimate is that net benefits from the advisory were negative.

Absolute Humidity, Temperature, and Influenza Mortality: 30 Years of County-Level Evidence from the United States

Recent research exploring associations between environmental factors and influenza outcomes has devoted substantial attention to the role of absolute humidity. However, the existing literature provides very little quantitative epidemiologic evidence on the relations between absolute humidity and other weather variables and influenza outcomes in human populations. In the present study, the authors helped fill this gap by analyzing longitudinal weather and influenza mortality data, observed every month between January 1973 and December 2002, for each of 359 urban US counties. A flexible regression model was used to simultaneously explore fully nonlinear relations between absolute humidity and influenza outcomes and temperature and influenza outcomes. Results indicated that absolute humidity was an especially critical determinant of observed human influenza mortality, even after controlling for temperature. There were important nonlinear relations; humidity levels below approximately 6 g of water vapor per kilogram of air were associated with increases in influenza mortality. Model predictions suggested that approximately half of the average seasonal differences in US influenza mortality can be explained by seasonal differences in absolute humidity alone. Temperature modestly influenced influenza mortality as well, although results were less robust.

School buses, diesel emissions, and respiratory health.

School buses contribute disproportionately to ambient air quality, pollute near schools and residential areas, and their emissions collect within passenger cabins. This paper examines the impact of school bus emissions reductions programs on health outcomes. A key contribution relative to the broader literature is that we examine localized pollution reduction programs at a fine level of aggregation. We find that school bus retrofits induced reductions in bronchitis, asthma, and pneumonia incidence for at-risk populations. Back of the envelope calculations suggest conservative benefit-cost ratios between 7:1 and 16:1.

Environmental Disclosure Evidence From Newsweek’s Green Companies Rankings

Corporate-level environmental information disclosure is increasingly common. This article studies the impact of a prominent media-generated sustainability ratings program, Newsweek’s 2009 ranking of the 500 largest U.S. firms. Using an event study methodology, the authors find the rankings had a significant impact on shareholder value. Firms in the top 100 experienced abnormal returns after the information release that were 0.6%–1.0% higher than returns of firms in the bottom 400. The form of the information released had significant effects as well. Nuanced environmental score variables had no independent impact on market outcomes; only the final ranking mattered. This article also explores possible channels through which the rankings may have had their impact. The authors find suggestive evidence that private and public politics mechanisms were the most important.

CURBSIDE RECYCLING IN THE PRESENCE OF ALTERNATIVES

We measure the extent to which curbside access affects quantity recycled. We use novel data to distinguish between new recycling and material diverted from other recycling modes. We find that the marginal impact of expanding curbside programs on total recycled quantities is small, in part because curbside programs significantly cannibalize returns from drop-off recycling centers. Failure to account for cannibalization from other modes may substantially overestimate the benefits of curbside programs. We conclude with simple cost-effectiveness comparisons. Results suggest that incremental expansion of curbside access may not be cost-effective.

Environmental Enforcement and Compliance: Lessons from Pollution, Safety, and Tax Settings

Environmental monitoring and enforcement are controversial and incompletely understood. This survey reviews what we do and do not know about the overall effectiveness, as well as the cost effectiveness, of pollution monitoring and enforcement. We ask five key questions: What do environmental monitoring and enforcement actions look like in the real world? How do we assess environmental compliance and deterrence? Do environmental monitoring and enforcement actions get results? How, why, and when do inspections and sanctions achieve compliance and reduce pollution? And, what do the answers to the preceding questions tell us about designing and implementing more effective and more cost effective public policies for the environment? A key contribution is drawing lessons from diverse sources, including insights from theoretical, empirical, and experimental contributions in environmental, tax, and safety settings. We conclude that traditional environmental monitoring and enforcement actions generate important deterrence effects. However, there are limits to such deterrence, and deterrence itself cannot fully explain all patterns of environmental behavior. Encouraging compliance requires both traditional tools and additional tools.

Valuing Marine Biodiversity in the Gulf of Mexico: Evidence from the Proposed Boundary Expansion of the Flower Garden Banks National Marine Sanctuary

ABSTRACT Ecological diversity is especially high in the Gulf of Mexico, and multiple Gulf of Mexico resources imply complex management challenges. Yet, relatively little is known about social values of marine biodiversity in the Gulf of Mexico. This article uses results from a stated preference survey of nationally representative households to quantify economic values. The specific assessment scenario involves a current policy proposal to expand the boundaries of the Flower Garden Banks National Marine Sanctuary. Willingness to pay estimates range from