Monitoring Environmental Standards: Do Local Conditions Matter?

In deciding whether to inspect specific plants, regulators are sensitive to local environmental damages and, all things being equal, allocate more inspection efforts to plants whose emissions are likely to generate more damage. In other words, although national standards are uniform, local conditions affect the local monitoring and enforcement of national standards and effectively determine the price of pollution in each area. Economists have criticized regulations that impose uniform environmental standards on plants that may face different marginal abatement costs and different marginal damage functions. Such critics ignore the significant difference in implementation of standards across plants, which gives rise to nonuniform standards. Dion, Lanoie, and Laplante analyze what determines the regulators' monitoring activities and what factors explain their decision on whether to inspect a plant's environmental performance. They find that in deciding whether to inspect specific plants, regulators are sensitive to local environmental damages and, all things being equal, allocate more inspection efforts to plants whose emissions are likely to generate more damage. Although national standards (as defined by laws and regulations) are uniform, their implementation is a function of local conditions. Local monitoring and enforcement of national standards effectively determines the price of pollution in each area. Which means that, all things being equal, local enforcers could redirect resources in a way that approximates optimal behavior. Ignoring the tradeoffs taking place locally could undermine and render ineffective regulatory and policy reform that is strictly national. This finding supports the finding of Wang and Wheeler (Pricing Industrial Pollution in China, Policy Research Working Paper 1644, World Bank) that local enforcement of uniform national standards...