Paper Number: 2003-03

Document Date: 04/2003

Author(s): Ronald J. Shadbegian and Wayne B. Gray

Subject Area(s): Costs of Pollution Control; Air Pollution; Environmental Policy

Keywords: environmental performance; pollution abatement capital stock; air pollution emissions; productive efficiency

Abstract: 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 an 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.

This paper is part of the Environmental Economics Working Paper Series.

• What Determines Environmental Performance at Paper Mills? The Roles of Abatement Spending, Regulation, and Efficiency (PDF)(37 pp, 777 K, 04/2003)