Controlling Industrial Pollution: A New Paradigm

Conventional discussions of pollution regulation in developing countries have been too shallow - devoting inordinate attention to the choice of instrument while ignoring the preconditions for applying any instrument effectively. They have also been too narrow - focusing only on the interaction of state and factory, and ignoring the role of the market and the community. Afsah, Laplante, and Wheeler call for a revised model for the regulation of industrial pollution. They think the traditional emphasis on appropriate instruments, while ultimately correct, is premature, because agencies in most developing countries have too many problems with information and transaction costs to implement any instruments comprehensively. Once regulators have better information, more integrated information systems, more capacity for setting priorities, and a stronger public mandate, it will not be difficult for them to manage pollution more cost-effectively. Overhasty introduction of market-based instruments will not work and will probably discredit those potentially powerful regulatory tools. The new model of regulation should relegate regulators to their proper place in the scheme of things. Factories' environmental performance is shaped by the interaction of agents with different incentives. The state should play a role in regulating pollution externalities, but the role of the community and market must also be recognized. In the authors' view, appropriate regulation in developing countries should incorporate five key features: ° Information intensity. Regulators need reliable data, integrated information systems, and the ability to set priorities that reflect relative costs and benefits. Markets and communities need timely, accurate, public information to assess factories' environmental performance. ° Orchestration, not dictation. Potentially high-leverage programs to a...