Environmental Externalities: The Role of Information, Standards and Enforcement
Paper Session
Sunday, Jan. 9, 2022 3:45 PM - 5:45 PM (EST)
- Chair: Christian Leuz, University of Chicago
Does Public Participation Matter? Evidence from a National-Scale Experiment on the Enforcement of Environmental Regulations in China
Abstract
Countries around the world rely on public disclosure programs to aid in the enforcement of environmental regulations, yet little is known about whether they are effective and if they are what makes them so. We layer a national-scale field experiment that experimentally directs information on firm violations to either regulators or the violating firms through public or private channels. Publicly notifying the regulator of a firm’s violation through Weibo (a popular Chinese social media platform that is comparable to Twitter) causes an increase in regulatory oversight and reduces subsequent violations by 40% and air and water pollution emissions by 12% and 5%, respectively. In contrast, informing the regulator through private channels that do not make the notification publicly known only causes a small and statistically insignificant impact on emissions. Additionally, we vary the fraction of treatment firms experimentally at the prefecture-level and find that there is a positive general equilibrium impact as the control firms in high-intensity prefectures reduce violations more than control firms in low-intensity treatment prefectures. A back-of-the-envelope calculation suggests that encouraging citizen participation would lead to significant improvements in China’s aggregate environmental quality.Internalizing Externalities Disclosure Regulation for Hydraulic Fracturing, Drilling Activity and Water Quality
Abstract
The rise of shale gas and tight oil development has triggered a major debate about hydraulic fracturing (HF). In an effort to mitigate risks from HF in unconventional development, many U.S. states have introduced disclosure mandates for HF fluids. In this paper, we study the effects of this important regulatory initiative on HF activity and its environmental impact. We find significant improvements in water quality, examining salts that are considered signatures for HF impact, after the disclosure mandates are introduced. We document effects along the extensive margin (less HF activity) and the intensive margin (less per-HF well impact). Most of the improvement comes from the intensive margin. Supporting this interpretation, we find that, after the introduction of disclosure, operators pollute less per unit of production, use fewer toxic chemicals, and that there are fewer spills related to the handling of HF fluids and wastewater. We also explore possible mechanisms through which disclosure regulation can be effective and find that public pressure likely plays an important role. Taken together, our empirical assessment of a major regulatory initiative for HF provides novel evidence on how disclosure mandates can help to internalize negative and fairly widespread external effects.Inequality, Information Failures and Air Pollution
Abstract
Research spanning several disciplines has repeatedly documented disproportionate pollution exposure among the poor and communities of color. Among the various proposed causes of this pattern, those that have received the most attention are income inequality, discrimination, and firm costs (of inputs and regulatory compliance). We argue that an additional channel — information — is likely to play an important role in generating disparities in pollution exposure. We present multiple reasons for a tendency to underestimate pollution burdens. Using a model of housing choice, we then derive conditions under which “hidden” pollution leads to an inequality — even when all households face the same lack of information. This inequality arises when households sort according to known pollution and other disamenities, which we show are positively correlated with hidden pollution. To help bridge the gap between environmental justice and economics, we discuss the relationship between hidden information and three different distributional measures: exposure to pollution; exposure to hidden pollution; and welfare loss due to hidden pollution.Discussant(s)
Ashley Langer
,
University of Arizona
Nicholas Ryan
,
Yale University
Elaine Hill
,
University of Rochester
Matthew Neidell
,
Columbia University
JEL Classifications
- Q5 - Environmental Economics
- D8 - Information, Knowledge, and Uncertainty