Incentives for Pollution Control: Regulation and Public Disclosure

33 Pages Posted: 20 Apr 2016

See all articles by Jérôme Foulon

Jérôme Foulon

World Bank

Paul Lanoie

HEC Montreal - Institute of Applied Economics

Benoît Laplante

World Bank - Research Department

Date Written: February 2000

Abstract

Both regulation and public disclosure belong in the environmental regulators' arsenal. Strong, clear standards combined with a significant, credible penalty system send the right signals to the regulated community, which responds by lowering pollution emissions. The public disclosure of environmental performance also provides strong additional incentives to control pollution.

An increasing number of regulators have adopted public disclosure programs to create incentives for pollution control. Previous empirical analyses of monitoring and enforcement issues have focused strictly on the impact of such traditional practices as monitoring (inspections) and enforcement (fines and penalties) on polluters' environmental performance. Other analyses have separately focused on the impact of public disclosure programs. But can these programs create incentives in addition to the normal incentives of fines and penalties?

Foulon, Lanoie, and Laplante study the impact of both traditional enforcement and information strategies in the context of a single program, to gain insights into the relative impact of traditional (fines and penalties) and emerging (public disclosure) enforcement strategies. Their results suggest that the public disclosure strategy adopted by the province of British Columbia, Canada, has a greater impact on both emission levels and compliance status than do orders, fines, and penalties traditionally imposed by the courts and the Ministry of the Environment.

But their results also demonstrate that adopting stricter standards and higher penalties also significantly affected emission levels. Policymakers, take note:

The presence of strong, clear standards together with a significant, credible penalty system sends appropriate signals to the regulated community, which responds by lowering pollution emissions.

The public disclosure of environmental performance creates strong additional incentives to control pollution.

This paper - a product of Infrastructure and Environment, Development Research Group - is part of a larger effort in the group to understand the determinants of environmental performance.

Suggested Citation

Foulon, Jérôme and Lanoie, Paul and Laplante, Benoît, Incentives for Pollution Control: Regulation and Public Disclosure (February 2000). Available at SSRN: https://ssrn.com/abstract=629138

Jérôme Foulon

World Bank

1818 H Street, N.W.
Washington, DC 20433
United States

Paul Lanoie (Contact Author)

HEC Montreal - Institute of Applied Economics ( email )

3000, ch. de la Côte-Ste-Catherine
Montréal, Quebec H3T 2A7
Canada

Benoît Laplante

World Bank - Research Department ( email )

1818 H Street, N.W.
Washington, DC 20433
United States
202-458-5878 (Phone)
202-522-3230 (Fax)

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