There is increasing interest in the United States and other countries in the potential role that can be played by information disclosure programs, as substitutes or complements for conventional command-and-control or market-based environmental policy instruments. Much of this interest can be attributed to the apparent success of the Toxics Release Inventory (TRI) program, which requires large manufacturing facilities to report publicly their annual releases of certain chemicals. Since the inception of the TRI program in 1986, reported releases of over 300 regulated chemicals have fallen by more than 45%. The primary purpose of the proposed research is to analyze the efficacy of such information disclosure programs by examining the ways in which these programs can - in theory - affect environmental quality, and by investigating empirically the ways in which the TRI program has actually affected pollutant releases.
Approach: There are several pathways through which information disclosure might lead to pollution reduction, including: green consumerism, green investing, community pressure, the threat of future regulation, and organizational limitations of the firm. We will develop a theoretical model of the firms' production and pollution decisions that incorporates these pathways. We will then use this theoretical framework as the basis for an empirical analysis of the effect of TRI on facility decision-making, focusing on the chemical manufacturing sector. We will empirically estimate changes in the production functions utilized by the chemical industry from 1988 to 1998, allowing for firms to choose simultaneously their output levels and their pollution levels, controlling for potential confounding factors. Finally, we will construct indictors for each of the pathways identified in the theoretical model, and estimate the effect of these pathways on changes in facility-level environmental and economic outcomes.
Expected Results: This research will produce a greater understanding of how facilities respond to information disclosure programs such as the Toxics Release Inventory. This project will be the first to develop a dynamic model of facility-level responses to environmental information disclosure requirements that incorporates all of the potential pathways identified above and to empirically estimate the significance of each of the theoretical pathways on observed changes in productivity. This will benefit both the public potentially interesting in reducing their exposure to toxics by providing information on how best to use the TRI information to advocate for change and will also benefit stewardship efforts within the affected industries.