Are Management-Based Regulations Effective?: Evidence from State Pollution Prevention Programs

Abstract

This paper evaluates the effectiveness of management-based regulations in reducing pollution. Management-based regulations do not establish strict pollution reduction standards, but rather require each regulated entity to engage in its own review and planning process and develop a set of internal rules and initiatives consistent with achieving reductions in pollution. I develop a model of facility-level response to management-based regulation that provides predictions about the circumstances under which these regulations are likely to be effective. I then test these predictions empirically by taking advantage of a natural policy experiment that occurred when fourteen states adopted management-based regulations for toxic chemical control in the 1990s. Using panel data for just over 31,000 manufacturing plants in the United States, I investigate whether facilities subject to management-based regulations had larger changes in total quantities of toxic chemical releases, engaged in more pollution prevention activities, or reported fewer toxic chemicals to the Toxics Release Inventory. The analysis suggests that management-based regulation has had a measurable positive effect on the environmental performance of manufacturing plants. In particular, plants subject to management-based regulation experienced larger decreases in total pounds of toxic chemicals released and were more likely to engage in source reduction activities.