Clean Water Regulation Research Articles

Environmental Justice and the Clean Water Act: Implications for Economic Analyses of Clean Water Regulations

Environmental Justice and the Clean Water Act: Implications for Economic Analyses of Clean Water Regulations

Freshwater Mussels, Ecosystem Services, and Clean Water Regulation in Minnesota: Formulating an Effective Conservation Strategy

Freshwater mussels are threatened with extirpation in North America. They are a sentinel species for ecosystem function and contribute towards many ecosystem services. As mussels require clean water to survive, and since conserving ecosystem services is implicit in the federal Clean Water Act, incorporating mussel conservation into state water policies could serve multiple conservation goals. In this paper we conduct a comprehensive critical review of three topics related to freshwater mussels: their contribution to ecosystem services, their links with water quality, and threats to their survival from water pollutants and extent of protection available from regulation. In so doing, we identify gaps between the water quality requirements of mussels and the protection provided by current water regulation to help inform clean water and conservation goals in Minnesota. We find freshwater mussels to be generally sensitive to a wide variety of pollutants, and particularly to nutrients such as total nitrogen and total phosphorus and to major ions such as chloride. In addition, we find that current state water quality standards may not be sufficiently protective of mussels. We formulate a framework for determining an effective conservation strategy for mussels in Minnesota based on ecological and economic criteria to ensure adequate conservation at a reasonable cost.

Investigation of the Effect of Substituent Species/Positions and Numbers on Removal of Toxicity from Chloro and Nitro Phenol Compounds with Fenton and Fenton-like Processes

Phenol derivatives containing substutient are used intensely in industry and their presence in surface and waste water is a problem requiring urgent solution due to their tendency for bioaccumulation, cancerogenic effects, high toxicity and weak biodegradability. In this study, the degradability and toxicity of chlorinated phenols 2-CP, 2,4-DCP and 4-CP and nitrated phenols 2-NP, 2,4-DNP and 4-NP were investigated. These phenols are included on the priority toxic pollutant list within the scope of clean water regulations according to both the US EPA-2014 and the European Union (2455/2001/CE) and form serious threats to public health and aqueous ecosystems. The degradability of chloro and nitro phenols was researched by applying the Fenton/Fenton-like processes (under optimal conditions) and measuring the model pollutant concentrations, COD and TOC parameters. The effects of substituent type/position and number were determined with toxicity measurements using Vibrio fischeri bacteria (DIN/EN/ISO 11348-2). Statistical analysis was performed in detail for both Fenton/Fenton-like processes (T test) and toxicology measurement results (One-Way ANOVA) for the model pollutants (Pandlt;0.05). In the first stage of the study, model pollutant removal of 95-100%, COD removal of 64-85% / 60-77% and TOC removal efficiency of 52-65% and 40-61% were achieved respectively with Fenton and Fenton-like processes. In the second stage of the study, the results of toxicity measurements of the pollutants performed before processing found EC50(mg/L) and toxic unit values (TU) were 8.10-12.34 for 2-CP, 2.24-44.67 for 2,4-DCP, 1.20-83.33 for 4-CP, 13.43-7.44 for 2-NP, 8.92-11.21 for 2,4-DNP, and 4.77-20.9 for 4-NP, respectively. After processing, the EC50/EC20 and TU values were determined to fall to unobservable levels. According to the order obtained with toxicity measurements of 4-CP andgt; 2,4-DCP andgt; 4-NP andgt; 2-CP andgt; 2,4-DNP andgt; 2-NP, the chlor substituent had higher toxic effect compared to nitro. As the substituent numbers increase the toxicity increased; however, para position was identified to be more toxic compared to other positions. The reason for the 4 (para) position being more toxic than the 2,4 (ortho-para) position is thought to be due to the chlor or nitro linked to the 2 or ortho position binding to the OH group of phenol with a 5- and 6-member H-bridge in cis position forming a ring, which leads to inactivity.

Redefining Clean Water Regulations Reduces Protections for Wetlands and Jurisdictional Uncertainty

The 2015 Clean Water Rule is being enforced in 26 states, with a legal stay resulting in the prior rules being enforced in the remaining 24 states, and a proposed re-definition is open for public comment. These rules define which streams and wetlands are protected by the Clean Water Act and which require a permit for development, fill, or discharge of water and pollutants. In the Wabash River Basin, as much as 39% of wetlands in the basin would lose their current federal protections. The 2015 Clean Water Rule did not expand jurisdictional scope, but the proposed rule would significantly contract protections in our study basin. The proposed re-definition shifts uncertainty from the “significant nexus” test to definitions of stream intermittency and typical hydrologic conditions.

Deciphering dueling analyses of clean water regulations.

Hundreds of millions of dollars in benefits were discarded

Effects of environmental regulation on actual and expected profitability

The Porter hypothesis asserts that properly designed environmental regulation motivates firms to innovate, which ultimately improves profitability. In this study, we test empirically the Porter hypothesis and the competing hypothesis that regulation undermines profitability (“costly regulation hypothesis”). In particular, we estimate the effect of clean water regulation, as reflected in the stringency of firm-specific effluent limits for two regulated pollutants, on the profitability of chemical manufacturing firms. As our primary contribution, we contrast the effect of clean water regulation on actual profitability outcomes and its effects on investors' expectations of profitability. Our results for actual profitability are consistent with the Porter hypothesis, while our results for expected profitability are consistent with the costly regulation hypothesis. Thus, our empirical results demonstrate that investors do not appear to value the positive effect of tighter clean water regulation on actual profitability.

SHORT-RUN AND LONG-RUN IMPLICATIONS OF ENVIRONMENTAL REGULATION ON FINANCIAL PERFORMANCE

I. INTRODUCTION The Porter hypothesis asserts that properly designed environmental regulation motivates firms to innovate, which ultimately improves financial performance (Porter 1990, 1991; Porter and van der Linde 1995; van der Linde 1993). Many economists criticize this claim, arguing that firms voluntarily seek opportunities to improve financial performance regardless of regulation (Palmer, Oates, and Portney 1995). In particular, critics argue that environmental regulation undermines firms' abilities to pursue opportunities to improve financial performance. Although these arguments generally focus on the effect of regulation on long-run financial performance, they also apply to the effect of regulation on short-run financial performance. (1) Porter and van der Linde (1995) introduce their argument by indirectly attributing competitiveness to financial performance in the context of lower costs and higher revenues: Competitiveness at the industry level arises from superior productivity, either in terms of lower costs than rivals or the ability to offer products with superior value that justify a premium price, (pp. 97-98) Jaffe and Palmer (1997) describe this focus on financial performance as the strong version of the Porter hypothesis: The shock of a new regulation may therefore induce them [firms] to broaden their thinking and to find new products or processes that both comply with the regulation and increase profits, (p. 610) Our analysis tests the strong version of the Porter hypothesis: tighter regulation improves the financial performance of individual firms. By-testing this hypothesis, we contribute to the economic literature that assesses the effects of environmental regulation on various aspects including firms' competitiveness, innovation activities, employment, productivity, investment, location decisions, and financial performance. Previous empirical studies that examine consequences of environmental regulation generally do not examine both short-run and long-run consequences. In contrast, our study empirically examines both the short-run and long-run effects of environmental regulation on financial performance. In particular, we test the Porter hypothesis in terms of both short-run and long-run effects of Clean Water Act regulation (hereafter water regulation) on the financial performance of publicly owned firms in the chemical manufacturing industries. To measure financial performance, we use return on sales (i.e., profits divided by sales), which captures profitability. As our measure of clean water regulation, we use permitted wastewater discharge limits, which are imposed on individual facilities. To strengthen our analysis, our study draws upon a panel data set. Thus, we are able to control more completely for heterogeneity across firms and exploit both interfirm and intrafirm variation. Our results indicate that tighter clean water regulation (i.e., lower permitted discharge limits) improves financial performance in both the short run and long run with a stronger effect in the long run. In particular, return on sales increases by 1.5% in the short run and 4.5% in the long run. II. RELATIONSHIP BETWEEN ENVIRONMENTAL REGULATION AND FINANCIAL PERFORMANCE A. Theoretical Literature To guide our empirical analysis, we first assess two conflicting theoretical arguments exploring the effect of environmental regulation on financial performance. Porter and van der Linde (1995) argue that properly designed and implemented environmental regulation removes organizational inertia and ultimately improves financial performance. Innovation and improved resource productivity are the mechanisms through which this relationship unfolds. As long as firms perceive their production processes and products as elements in a dynamic setting rather than a static setting, firms seize regulation as an opportunity to invest in technologies that not only minimize strains on the environment but also maximize the efficiency of production processes and/or improve the quality of products. …

The Effect of Clean Water Regulation on Profitability: Testing the Porter Hypothesis

Previous theoretical research provides opposing arguments regarding the effect of environmental regulation on profitability. This study provides empirical evidence on this debated effect by testing the strong version of the Porter hypothesis. We employ panel data analysis to examine the effect of water regulation, as measured by permitted wastewater discharge limits, on the profitability of publicly held firms operating within the chemical manufacturing industries. We find that tighter water regulation meaningfully lowers profitability. By reinterpreting profitability in terms of sales and costs, the results demonstrate that tighter water regulation increases costs conditioned on a given level of sales.

Does the Porter Hypothesis Explain Expected Future Financial Performance? The Effect of Clean Water Regulation on Chemical Manufacturing Firms

Previous research provides opposing theoretical arguments regarding the effect of environmental regulation on financial performance. As one important argument, the Porter hypothesis claims that tighter regulation improves financial performance. This study provides empirical evidence on this debated effect. In particular, we employ panel data analysis to examine the effect of Clean Water Act regulation, as measured by permitted wastewater discharge limits, on expected future financial performance, as measured by Tobin’s q, for publicly owned firms in the chemical manufacturing industries. We find that tighter permitted discharge limits lower Tobin’s q; i.e., more stringent Clean Water Act regulation undermines expected future financial performance. By decomposing Tobin’s q into its constituent components—market value and replacement costs—and estimating each component separately, we find that tighter permitted discharge limits lower both components with a larger impact on market value, which implies that investors revise their expectations of the discounted present value of future profits in response to changes in Clean Water Act regulation.