Kathleen Segerson

Uncertainty and incentives for nonpoint pollution control

This paper describes a general incentive scheme for use in controlling nonpoint pollution problems where actual pollutant loadings have a random distribution that is contingent on the level of abatement undertaken and where direct monitoring of polluting activities is difficult. Special cases and their advantages and disadvantages are discussed.

Assessing Voluntary Programs to Improve Environmental Quality

The last decade has seen a dramatic increase in the use of voluntaryapproaches (VAs) to environmental protection, which has spurned agrowing literature on the relative merits of voluntary vs. mandatoryapproaches. This paper draws on that literature to discuss both thetheoretical and empirical issues that arise in the evaluation orassessment of a particular VA. We consider both the environmentaleffectiveness and the efficiency of this policy approach. Our aim is toaid policymakers in evaluating a specific program or in thinking aboutthe use and design of a VA. We identify some key features that arelikely to increase both the effectiveness and the efficiency of VAs.

Mandatory versus voluntary approaches to food safety

Food safety policy is currently based on a combination of voluntary measures undertaken by producers and regulatory measures imposed, for example, by the US Department of Agriculture and the Food and Drug Administration (e.g., mandatory HACCP systems). This article addresses the question of whether reliance on voluntary approaches is likely to lead to adequate consumer protection. Drawing on recent literature on the choice between voluntary and mandatory approach to environmental protection and standard models of product liability, the article develops an analytical framework to determine the conditions under which firms are likely to invest in food safety voluntarily. The results suggest that for goods for which consumers can readily detect safety characteristics, market forces can create incentives for voluntary provision of safety. However, for goods for which consumers cannot readily detect food risks, market forces are not likely to be sufficient to afford adequate protection. Even in such a context, however, direct government regulation is not always necessary. The threat of the imposition of mandatory controls (possibly coupled with financial inducements for undertaking voluntary approaches) may provide firms with sufficient incentives to invest in food safety in an effort to avoid those controls. However, if firms do not respond, regulators must be prepared to follow through on their threats and impose a regulatory system of protection.

The Impact of Policies and Land Characteristics on Potential Groundwater Pollution in Wisconsin

In this paper we present an empirical framework for quantifying the extensive margin effects of commodity programs and chemical-use taxes on potential groundwater pollution in Wisconsin. The approach emphasizes the role of the joint distribution of crops and site characteristics in determining policy impacts on groundwater contamination. The results indicate that for a given reduction in total polluting acreage an increase in the Acreage Reduction Program rate for corn is well targeted and would reduce high-polluting acreage more than a chemical-use tax or a target price policy in the areas where it might be needed most.

The structure of penalties in environmental enforcement: An economic analysis

The enforcement of environmental laws has undergone some rather dramatic changes over the last decade. Civil and criminal monetary penalties have been imposed more frequently on violators and the size of the penalties has increased.’ Individuals, both corporate employees and officers, have become more common targets for penalties.2 Finally, incarceration has not only become a more commonly imposed sanction,3 but the resulting jail sentences are longer.4 Despite this trend toward increased use of individual sanctions in the form of fines or incarceration, the efficiency implications of this trend have received little attention. The related work that has been published falls into two categories. The first considers the relative impacts or merits of holding firms liable for the actions of their employees, a principle known as “vicarious liability” [31, 32, 11, 29, 151. Arguments in favor of vicarious liability presume that the firm can sanction employee malfeasance internally through compensation schemes that are tied to

Voluntary Agreements with Industries: Participation Incentives with Industry-Wide Targets

We consider a policy environment in which an entire industry is faced with possible imposition of an emissions tax if environmental goals are not met voluntarily. We develop a multiple-firm model of pollution abatement in this context. Using the concept of a self-enforcing equilibrium, we examine the free-riding incentive of individual firms and its impact on the viability of the voluntary approach. We find that, despite the free-riding problem, a sub-group of firms have an incentive to participate in the VA. The VA is strictly preferred by the industry as a whole, although it is not cost-minimizing. (JEL Q53, Q58)

Information Problems in the Design of Nonpoint-Source Pollution Policy

Large industrial and municipal emissions were the focus of first-generation environmental policies of the 1970s. Twenty years later, with much success in cleaning up industrial and municipal sources, the focus has changed. The problems of the moment include hazardous wastes, solid wastes, auto pollution, nutrient pollution, pesticide pollution, and sedimentation. These problems, by and large, are caused by many small polluters—such as users of weed sprays, motorists, farmers, and generators of household trash.

On the measurement of economic capacity utilization for multi-product industries

Abstract This paper considers capacity utilization measures for the multi-product firm. The single–product dual measure of capacity utilization easily extends to the multi-product case. Three possible extensions of the single-product primal measure are considered. Although each has its limitations because of the restrictions embodied in it, each provides different, yet potentially useful information about capacity utilization in a multi-product industry. The dual and primal measures of multi-product capacity utilization are applied to the multi-species New England fishing industry to evaluate the potential for capacity expansion under a regulatory program of licence limitation.

Enhancing the Content Validity of Stated Preference Valuation: The Structure and Function of Ecological Indicators

Stated preference surveys often provide ambiguous descriptions of ecological commodities, yielding welfare estimates that have unclear interpretations and cannot be linked to measurable outcomes. This paper proposes guidelines to promote ecological content validity in survey scenarios and defensible use of ecological information for welfare analysis. These guidelines are illustrated through an application to migratory fish restoration. Content validity is evaluated vis-á-vis norms for communication of ecological changes in the ecological literature. Findings suggest that less structured treatment of ecological commodities may lead to an omission of information that is relevant to respondents and essential for valid welfare estimation. (JEL Q51, Q57)

Voluntary Approaches to Environmental Protection: The Role of Legislative Threats

Traditionally, policymakers have relied on legislative and regulatory restric-tions on polluters to ensure adequate protection of the environment. To a lesser extent, they have used economic incentives, such as taxes, tradeable permits, and environmental liability.1 Recently, however, attention has turned to the use of voluntary agreements between regulators and polluters as an alternative to mandatory approaches based on regulation or legislation. Voluntary agreements can be an attractive alternative to mandatory restrictions since they have the potential to reduce compliance costs by allowing greater flexibility and to reduce administrative and other transactions costs (Baggott, 1986; Goodin, 1986). Notable examples of the recent use of voluntary environmental protection agreements include the US Environmental Protection Agency’s 33/50 Program to reduce voluntarily discharges of industrial toxic pollutants (US Environmental Protection Agency, 1992) and the Dutch National Environmental Policy Plan.