Flexibility In Cutting Toxic Releases Yields Dividends

Economists Madhu Khanna and Lisa Damon studied the impact of the 33/50 program started by the Environmental Protection Agency (EPA) in 1991 to encourage firms to reduce their pollution emissions ­ by 33 percent by 1992 and by 50 percent by 1995. The voluntary program gave companies flexibility to determine how to reduce 17 highly toxic chemicals.

The EPA has since hailed the program as a success based on pollution reductions of 46 percent compared with the level shown in the 1988 Toxic Release Inventory.

In their independent sampling of chemical companies, Khanna and Damon found that the EPA's results were inflated by including pollution reductions that took place between 1988 and 1991 before the voluntary program began.

Nevertheless, sampled participants did reduce their overall releases by 41 percent between 1991 and 1993, and had a significantly better record in pollution reduction than chemical companies not participating in the program. The figures were adjusted to equalize size and other variables between participating and non-participating companies.

Their findings suggest that the new environmental initiatives "have been effective in motivating corporations to undertake self-regulated efforts to improve their environmental performance," Khanna and Damon concluded in a paper published by the U. of I. Program in Environmental and Resource Economics.

Moreover, the 33/50 program led to a positive change in the composition of wastes. "Firms have reduced their on-site releases and increased off-site transfers for recycling, energy recovery and treatment. This change is likely to lower the net risks associated with toxic waste generation."

Looking at the question of costs, the researchers found that participating chemical companies had lower average earnings in the three years studied than non-participating companies. However, they concluded that the immediate costs of the program would be offset by reduced future liabilities and savings due to increased efficiency.

The threat of possible liabilities under the Superfund Act was a strong motivator for many companies to participate in the voluntary program, they noted, adding that "voluntary initiatives alone are unlikely by themselves to generate the desired changed in corporate behavior."

Khanna and Damon concluded that "credible penalties" must be levied against companies that make little or no effort to clean up toxic wastes. "New generation policy initiatives should be regarded as complements to rather than substitutes for mandatory environmental regulation."