Environmental Economics

Looking Inside the Black Box: Microlevel Empirical Analyses of the Impact of State and Federal Policy Instruments on Hazardous Waste Generation and Management

  • Abstract
    State level policy-makers who seek to influence the internal decisions of waste-generating firms have employed many different policy tools to achieve their ends, including information-based reporting programs, education programs, waste stream taxes, technology-based regulations, performance standards, and subsidies. While there is a significant theoretical literature that compares the relative merits of these instruments as they are applied to various pollutants and media, there is little empirical analysis that compares the effects of these instruments in practice, and even less on the application of these instruments in hazardous waste reduction programs. The purpose of this proposed research is to significantly extend the range of empirical studies. First, compared to existing studies that examine one or a few instruments at a time, the range of policy instruments will be significantly extended by developing a database of state and federal laws, regulations, and programs to control hazardous wastes. This extension not only provides insights into a greater range of instruments, but allows examination of interaction effects among instruments. Second, by using a database of plant- or mill-level data rather than state-level data used in most existing studies, we will be able to "look inside the black box" to see specifically how firms change their generation, treatment and off-site shipment decisions. Given that environmental hazards rise with increased generation and can also be effected by shipment decisions, the detailed information on management decisions has important implications for pollution prevention policy. Third, by using a database that matches firms' pollution generation, pollution prevention, and pollution release data with their production, factor-demand, and value-added characteristics, we will be able to control for firm-specific explanatory variables better than studies that use state-level economic indicators to account for variations in production levels. Approach: Past empirical analyses of environmental regulation effects have drawn almost entirely on the Toxics Release Inventory (TRI) database maintained by the US EPA. While that database has provided some insights, it also has important limitations. This proposed study will employ an existing database that links EPA's Biennial Reporting System (BRS) data on hazardous waste streams with the Census Bureau's Longitudinal Research Database (LRD) on firm characteristics. The BRS/LRD data from the database has been combined with the Census Bureau's Pollution Abatement Costs and Expenditures (PACE) data to add information on pollution abatement inputs. Our study will also make use of Census' LRD/TRI database link to provide information on the toxicity of the waste streams reported in the BRS data. In a parallel activity, the project will develop a database of state and federal regulations that affect facilities' decisions about the generation and management of hazardous waste. Finally, the BRS/LRD/PACE database will be combined with the regulation database to allow empirical examination of the relation among government regulations and programs, waste generation and management decisions, and facilities' economic and technical characteristics. Building on a widely accepted microeconomic model of the firm, the study will then conduct several econometric analyses that will provide insights into the key relationships that determine the relative effectiveness of alternative regulatory approaches to hazardous waste minimization and management. Expected Results: This proposed research will provide empirically rigorous evidence of the performance of various policy instruments. This would include the costs that they impose on facilities at both the production and waste management phases, the pollution prevention behaviors that they motivate, the impacts on waste generation quantities, modifications in waste stream characteristics, changes in the ultimate disposition of wastes (e.g., on- or off-site treatment, recycling, or disposal), and effects on production and pollution control capital investment. All of this information should prove enormously helpful to state policy makers in their evaluation and design of different policy instruments intended to minimize waste generation and lead to more efficient allocation of efforts at the state.
  • Metadata
    Principal Investigators:
    Good, David
    Richards, Kenneth
    Technical Liaison:
    Research Organization:
    Indiana University
    Funding Agency/Program:
    Grant Year:
    Project Period:
    April 1, 2001 tp March 31, 2003
    Cost to Funding Agency:
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