Do Improvements in Environmental Performance have an Adverse Impact on Employment

Abstract

One dominant argument against environmental regulations is that the regulations will increase costs to facilities, causing the facilities to lay-off their workers. However, there are several ways facilities can respond to regulatory and community pressures to increase environmental performance. The facility could reduce its emissions of toxic chemicals by preventing pollution at the beginning of the process, controlling pollution by recycling or treating chemicals, or controlling pollution using end of pipe techniques. Furthermore, these responses can affect employment in different ways, depending on whether abatement activities require more or less labor and their effect on the scale of output. The purpose of this study is to examine the impact of facilities’ voluntary reductions in toxic emissions on their level of employment by estimating the level pollution control and employment as a simultaneous decision made by facilities. We compare the different methods facilities use to reduce their emissions and how these methods affect facility-level employment. We apply a 3SLS model to panel data from the EPA’s Toxic Release Inventory and a unique facility-level dataset, which includes facility-level characteristic data on over 10,000 establishments across the United States over 15 years, from 1995 to 2011. Our results show that reductions in toxic releases had a statistically significant negative impact on employment. However, if the facility reduces emissions using prevent pollution methods through reducing emissions per unit of sales, then the facility will reduce less employment than if the facility reduced pollution using end of pipe pollution control methods. These effects are similar if the facility is reducing regulated emission as well as non-regulated emissions.