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Pollution Havens and the Trade in Toxic Chemicals: Evidence from U.S. Trade Flows
June 2010
Working Paper Number:
CES-10-12
Does increased environmental protection decrease the emission of pollutants or merely displace them? Using newly available trade data, this study examines the flows of a panel of chemicals designated as toxic by the U.S. Environmental Protection Agency's Toxics Release Inventory (TRI). Estimates from a differences-in-differences model indicate a significant increase in net imports when a chemical is listed on TRI, which suggests production offshoring. Furthermore, I find that increased imports due to this 'pollution haven effect' are sourced disproportionately from poorer countries, which are likely to have lower environmental protection standards. At the same time, I observe the bulk of American trade in toxic chemicals occurs with other wealthy countries, which may be attributed to the capital intensity of chemical production.
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U.S. Trade in Toxics: The Case of Chlorodifluoromethane (HCFC-22)
September 2009
Working Paper Number:
CES-09-29
This paper explores whether environmental regulation affects where pollution-intensive goods are produced. Here we examine chlorodifluoromethane (HCFC-22), a chemical designated as toxic in 1994 by the U.S. Environmental Protection Agency's Toxics Release Inventory (TRI). Trends show a decline in the number of domestic producers of this chemical, a decline in the number of manufacturing facilities using it, and an increase in the number (and share) of facilities claiming to import it. Transaction-level trade data show an increase in the import of HCFC-22 imports since its TRI listing ' an increase that is faster than that of all non-TRI listed chemicals. This is suggestive of a pollution haven effect. Meanwhile, we find that the vast majority of U.S. imports of HCFC-22 come from OECD countries. However, an increase in the share of imports from non-OECD countries since the chemical's listing suggests a shift of production to countries with more lax environmental standards. While the findings here are suggestive of regulatory effects, more rigorous analyses are needed to rule out other possible explanations.
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On Spatial Heterogeneity in Environmental Compliance Costs
September 2009
Working Paper Number:
CES-09-25R
This paper examines the extent of variation in regulatory stringency below the state level, using establishment-level data from the U.S. Census Bureau's Pollution Abatement Costs and Expenditures (PACE) survey to estimate a county-level index of environmental compliance costs (ECC). County-level variation is found to explain 11-18 times more of the variation in ECC than state-level variation alone, and the range of ECC within a state is often large. At least 34% of U.S. counties have ECC that are statistically different from their states'. Results suggest that important spatial variation is lost in state-level studies of environmental regulation.
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The Effect of Power Plants on Local Housing Values and Rents: Evidence from Restricted Census Microdata
July 2008
Working Paper Number:
CES-08-19
Current trends in electricity consumption imply that hundreds of new fossil-fuel power plants will be built in the United States over the next several decades. Power plant siting has become increasingly contentious, in part because power plants are a source of numerous negative local externalities including elevated levels of air pollution, haze, noise and traffic. Policymakers attempt to take these local disamenities into account when siting facilities, but little reliable evidence is available about their quantitative importance. This paper examines neighborhoods in the United States where power plants were opened during the 1990s using household-level data from a restricted version of the U.S. decennial census. Compared to neighborhoods farther away, housing values and rents decreased by 3-5% between 1990 and 2000 in neighborhoods near sites. Estimates of household marginal willingness-to-pay to avoid power plants are reported separately for natural gas and other types of plants, large plants and small plants, base load plants and peaker plants, and upwind and downwind households.
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Issues and Challenges in Measuring Environmental Expenditures by U.S. Manufacturing: The Redevelopment of the PACE Survey
July 2007
Working Paper Number:
CES-07-20
The Pollution Abatement Costs and Expenditures (PACE) survey is the most comprehensive source of information on U.S. manufacturing's capital expenditures and operating costs associated with pollution abatement. In 2003, the U.S. Environmental Protection Agency began a significant initiative to redevelop the survey, guided by the advice of a multi-disciplinary workgroup consisting of economists, engineers, survey design experts, and experienced data users, in addition to incorporating feedback from key manufacturing industries. This paper describes some of these redevelopment efforts. Issues discussed include the approach to developing the new survey instrument, methods used to evaluate (and improve) its performance, innovations in sampling, and the special development and role of outside expertise. The completely redesigned PACE survey was first administered in early 2006.
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Assessing Multi-Dimensional Performance: Environmental and Economic Outcomes
May 2005
Working Paper Number:
CES-05-03
This study examines the determinants of environmental and economic performance for plants in three traditional smoke-stack industries: pulp and paper, oil, and steel. We combine data from Census Bureau and EPA databases and Compustat on the economic performance, regulatory activity and environmental performance on air and water pollution emissions and toxic releases. We find that plants with higher labor productivity tend to have lower emissions. Regulatory enforcement actions (but not inspections) are associated with lower emissions, and state-level political support for environmental issues is associated with lower water pollution and toxic releases. There is little evidence that plants owned by larger firms perform better, nor do older plants perform worse.
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Pollution Abatement Expenditure by U.S. Manufacturing Plants: Do Community Characteristics Matter?
November 2003
Working Paper Number:
CES-03-18
A number of previous studies have demonstrated the impact of community characteristics on environmental outcomes such as local pollution levels and the siting of noxious facilities. If certain groups are indeed exposed to higher levels of air pollution, it may be due to a greater concentration of air polluters in those communities and/or facilities in those areas investing less in air pollution abatement. This paper examines the latter, using establishment-level data on manufacturing plants from the U.S. Census Bureau'''s Pollution Abatement Costs and Expenditures (PACE) survey. The empirical formulation herein allows plant-level air pollution abatement operating costs to depend on an array of community characteristics common to this literature. After controlling for establishment characteristics and federal, state, and local regulation, some of these local factors are found to have had an additional effect on air pollution abatement expenditures. In particular, populations with higher homeownership rates and higher per capita income enjoyed greater pollution abatement activity from their nearby plants. Meanwhile, establishments in communities where manufacturing accounted for a greater share of local employment had less pollution abatement spending, suggesting a local constituency that is more resistant to additional regulation. Political ideology is also found to play a role, with plants in areas with larger concentrations of Democrats having more expenditure on air pollution abatement, all else being equal. There is little evidence that race and ethnicity matter when it comes to the pollution abatement behavior of the most pollution-intensive facilities. The findings of this paper support those of a number of recent studies.
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Pollution Abatement Expenditures and Plant-Level Productivity: A Production Function Approach
August 2003
Working Paper Number:
CES-03-16
In this paper, we investigate the impact of environmental regulation on productivity using a Cobb-Douglas production function framework. Estimating the effects of regulation on productivity can be done with a top-down approach using data for broad sectors of the economy, or a more disaggregated bottom-up approach. Our study follows a bottom-up approach using data from the U.S. paper, steel, and oil industries. We measure environmental regulation using plant-level information on pollution abatement expenditures, which allows us to distinguish between productive and abatement expenditures on each input. We use annual Census Bureau information (1979-1990) on output, labor, capital, and material inputs, and pollution abatement operating costs and capital expenditures for 68 pulp and paper mills, 55 oil refineries, and 27 steel mills. We find that pollution abatement inputs generally contribute little or nothing to output, especially when compared to their '''productive''' equivalents. Adding an aggregate pollution abatement cost measure to a Cobb-Douglas production function, we find that a $1 increase in pollution abatement costs leads to an estimated productivity decline of $3.11, $1.80, and $5.98 in the paper, oil, and steel industries respectively. These findings imply substantial differences across industries in their sensitivity to pollution abatement costs, arguing for a bottom-up approach that can capture these differences. Further differentiating plants by their production technology, we find substantial differences in the impact of pollution abatement costs even within industries, with higher marginal costs at plants with more polluting technologies. Finally, in all three industries, plants concentrating on change-in-production-process abatement techniques have higher productivity than plants doing predominantly end-of-line abatement, but also seem to be more affected by pollution abatement operating costs. Overall, our results point to the importance using detailed, disaggregated analyses, even below the industry level, when trying to model the costs of forcing plants to reduce their emissions.
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What Determines Environmental Performance at Paper Mills? The Roles of Abatement Spending, Regulation, and Efficiency
April 2003
Working Paper Number:
CES-03-10
This paper examines the determinants of environmental performance at paper mills, measured by air pollution emissions per unit of output. We consider differences across plants in air pollution abatement expenditures, local regulatory stringency, and productive efficiency. Emissions are significantly lower in plants with a larger air pollution abatement capital stock: a 10 percent increase in abatement capital stock appears to reduce emissions by 6.9 percent. This translates into a sizable social return: one dollar of abatement capital stock is estimated to provide and annual return of about 75 cents in pollution reduction benefits. Local regulatory stringency and productive efficiency also matter: plants in non-attainment counties have 43 percent lower emissions and plants with 10 percent higher productivity have 2.5 percent lower emissions. For pollution abatement operating costs we find (puzzlingly) positive, but always insignificant, coefficients.
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Estimating the Hidden Costs of Environmental Regulation
May 2002
Working Paper Number:
CES-02-10
This paper examines whether accounting systems identify all the costs of environmental regulation. We estimate the relation between the 'visible' cost of regulatory compliance, i.e., costs that are correctly classified in firms' accounting systems, and 'hidden' costs i.e., costs that are embedded in other accounts. We use plant-level data from 55 steel mills to estimate hidden costs, and we follow up with structured interviews of corporate-level managers and plant-level accountants. Empirical results show that a $1 increase in the visible cost of environmental regulation is associated with an increase in total cost (at the margin) of $10-11, of which $9-10 are hidden in other accounts. The findings suggest that inappropriate identification and accumulation of the costs of environmental compliance are likely to lead to distorted costs in firms subject to environmental regulation.
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