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"Incentives for Environmental Self-Regulation and Implications for Environmental Performance"

Wilma Rose Q. Anton, George Deltas, and Madhu Khanna


First Author :

Wilma Rose Q. Anton
University of Central Florida
University of Central Florida, Economics Dept.
P.O. Box 161400
Orlando, FL 32816-1400


Second Author :

George Deltas
University of Illinois at Urbana-Champaign
1206 S. Sixth Street, M/C 706
Champaign, IL 61820


Third Author :

Madhu Khanna
Dept. of Agricultural and Consumer Economics
University of Illinois at Urbana-Champaign
1301 W. Gregory Drive
Champaign, IL 61820


Abstract :
The increasing reliance of environmental policy on market-based incentives has led firms to shift from regulation-driven management approaches to proactive strategies involving the voluntary adoption of environmental management systems (EMSs). We examine the factors leading to differences in the quality of EMSs adopted by a sample of S&P 500 firms and the implications of EMS quality for their environmental performance measured by toxic releases per unit sales. We show that a threat of liabilities and pressures from consumers, investors and the public are motivating EMS adoption. Further, the effect of consumer pressure on EMS is stronger for firms with a lower propensity to adopt: that is, consumer pressure raises the EMS quality of firms that would otherwise be low adopters. With regard to environmental performance, a higher quality EMS leads to lower toxic emissions per unit output, particularly for firms that had higher past pollution intensity. We also find that EMSs result in reductions in both off-site transfers and on-site releases per unit output but not in hazardous air pollutants per unit output. Regulatory and market based pressures are not found to have a direct impact on toxic release performance. Rather, the effect of regulatory and market pressures on toxic releases is indirect, i.e., by encouraging institutional change as manifested by the increase in EMS quality.
JEL Classification : L5 , Q2
Footnotes & Acknowledgements :
Senior authorship not assigned. Madhu Khanna is the corresponding author. We would like to acknowledge financial support by the University of Illinois Campus Research Board and by the EPA's Science to Achieve Results Program, managed by the EPA's Office of Research and Development, National Center for Environmental Research and Quality Assurance.
Manuscript Received : 2002
Manuscript Published : 2002
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