NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Pollution Abatement in the Pulp and Paper Industry

"Plants with more sensitive populations (children and elderly) living nearby emit less air pollution."

One of the most environmentally regulated sectors in the United States is the pulp and paper industry, a polluter of both air and water. Individual plants within the industry face very different regulatory pressures, though. Firms that do the pulping- processing raw wood or chips into fibers that are then used to produce paper- are heavier polluters. Separating the fibers is energy intensive, requiring large power boilers that emit significant air pollution. Chemicals used to separate and bleach the fibers can cause water pollution. However, newer plants tend to have better pollution controls, using secondary wastewater treatment, electrostatic precipitators, and scrubbers.

In 'Optimal' Pollution Abatement - Whose Benefits Matter, and How Much? (NBER Working Paper No. 9125), authors Wayne Gray and Ronald Shadbegian ask what is the optimal level of regulatory inspections and enforcement in pulp and paper firms. In theory, regulation should be increased to the point where the additional benefit equals the additional cost. The costs of pollution abatement depend on the plant's age, size, and technology, while the benefits depend on the extent of pollution and the number of people being affected. The focus of this study is on the benefits side.

Using sophisticated environmental models, Gray and Shadbegian calculate the benefits from reduced pollution as seen from the regulators' perspective. The SLIM-3 Air Dispersion Model calculates the total health effects of air pollution on the surrounding population at each plant. The EPA's National Water Pollution Control Assessment Model calculates the transport of pollutants downstream and the resulting effects on water quality on a mile-by-mile basis. This model provides a measure of the impact of each plant's water pollution on the surrounding population.

The authors' database includes 300 pulp and paper mills from 1985 to 1997. Detailed data on the characteristics of the population within a 50-mile radius of each plant, including age distribution and racial composition, is based on the 1990 Census of Population.

The authors note that most plants comply with air and water regulations: 84 and 70 percent compliance rates, respectively. Larger plants generally generate more pollution and face more regulatory activity. Plants in urban areas generate less pollution, but also face somewhat less regulatory activity. Plants in areas with high unemployment rates generate more air pollution and less water pollution and they face more enforcement actions.

As expected, the authors find that plants where pollution reductions provide larger benefits to the overall population emit less air and water pollution. Those plants with more sensitive populations (children and elderly) living nearby emit less air pollution. Plants located in poor neighborhoods attract less regulatory attention and emit more pollution. Plants in areas with politically active populations that are also environmentally conscious emit less pollution.

Not every result fits the authors' predictions, though. For example, assuming that nonwhites have less political influence, one would anticipate reduced regulatory attention at plants near nonwhite populations. But the results show that plants with more nonwhites nearby receive more regulatory activity and emit less pollution.

In sum, the authors believe their study provides "substantial evidence for both benefits and population characteristics affecting environmental outcomes." But they also suggest that further research is warranted because "there is a pattern of unexpected signs for regulatory activity." Finally, Gray and Shadbegian hope to study other industries to see whether the results for the paper industry hold up in other settings.

-- Marie Bussing-Burks


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