Why Paper Mills Clean Up: Determinants of Pollution Abatement in Four Asian Countries

Clean production is not uncommon even in very poor countries such as Bangladesh. Even when there is no formal regulation of pollution, large, efficient, domestically owned plants operating near relatively affluent communities have demonstrated excellent environmental performance. The same cannot be said for manufacturing facilities near poor communities. Formal regulation of industrial pollution control standards has been hampered in some developing countries by the absence of a clear regulatory framework, by limited institutional capacity, and by limited information on emissions. For many manufacturing facilities in developing economies, the government-imposed price of pollution is zero. Yet Hartman, Huq, and Wheeler find strong evidence that despite weak or nonexistent formal regulation and enforcement of environmental standards, many plants in South and Southeast Asia are clean. Of course, many plants are also among the world's worst polluters. To account for the extreme variation among plants, the authors review evidence from a survey of pollution abatement by 26 pulp and paper plants in four countries: Bangladesh, India, Indonesia, and Thailand. They find that the level of pollution abatement is significantly affected by three factors. Abatement is: ° Positively associated with scale and competitiveness. ° Negatively associated with public ownership. ° Unaffected by foreign links (in ownership or financing). A clear source of interplant differences is the level of community pressure, or informal regulation. Some communities successfully pressure plants to abate pollution even if they have little or no support from formal regulation. High local income is a powerful predictor of effective informal regulation. The authors also find that policy matters. Privatization, to the extent that it increases plant efficiency, can significantly im...