Discovery vs. Disclosure: EPA's Audit Policy and Hazardous Waste Compliance (original) (raw)
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Does Self-Policing Help the Environment? EPA's Audit Policy and Hazardous Waste Compliance
2013
In 1995, the Environmental Protection Agency (EPA) issued a final policy, "Incentives for Self-Policing: Discovery, Disclosure, Correction, and Prevention of Violations."' This policy, more commonly referred to as the Audit Policy, is designed to encourage greater compliance with environmental regulations by providing incentives for facilities to voluntarily disclose and correct violations of environmental regulations.2 More specifically, the Audit Policy eliminates or reduces civil penalties for violations that facilities disclose as the result of a documented self-audit procedure and correct within 60 days.3 Additionally, regulators may choose not to recommend criminal prosecution for these facilities.4 Repeated violations, violations that present a "serious or imminent harm" to human health and the environment, or violations that involve criminal activity are not covered by the policy. 5 Supporters of the Audit Policy argue that it is an "efficient an...
Big field, small potatoes: An empirical assessment of EPA's self-audit policy
SSRN Electronic Journal, 2004
Environmental self-auditing is said to deserve and require encouragement. Although firms can audit themselves more cheaply and effectively than regulators, they are deterred for fear that information they uncover will be used against them. To reduce this disincentive, EPA's "Audit Policy" lowers punitive fines when firms promptly disclose and correct self-discovered violations. While some contend that the Audit Policy is inadequate, EPA touts its success based on the policy's track record. Our examination of that track record leads us to question EPA's claim. Comparing the violations in these cases with those detected by standard EPA enforcement suggests that the typical self-audited violation is relatively minor. Cases arising under the Policy are more likely to concern reporting violations and less likely to concern emissions. The relative insignificance of self-audited violations raises a number of policy questions, including whether the Audit Policy should be revised to play a larger role in enforcement.
The Regulator's Role in Encouraging Self-policing: Evidence from the EPA's Audit Policy
2012
Explicitly designed "to encourage self-policing" to "promote [more] ethical and lawful conduct [in] the health care industry" "detail the steps taken to cure the violation and to prevent any recurrence" Designed to encourage environmental compliance auditing 5 US EPA's Audit Policy Objective and approach implement environmental auditing: "systematic, objective, and periodic" to encourage greater compliance with laws and regulations that protect human health and the environment encourage regulated entities to voluntarily discover, and disclose and correct violations of environmental requirements Incentive Mitigates 75% or 100% of gravity-based (punitive) penalty for regulatory violations facilities self-disclose Key conditions Self-disclosures must arise from: "systematic discovery of the violation through an environmental audit or the implementation of a compliance management system" Voluntary discloser must make assurances that it will "prevent recurrence of the violation"
Journal of Regulatory Economics, 2011
Using a unique facility-level dataset from Michigan, we examine the effect of environmental auditing on manufacturing facilities' long-term compliance with U.S. hazardous waste regulations. We also investigate the factors that affect facilities' decisions to conduct environmental audits and whether auditing in turn affects the probability of regulatory inspections. We account for the potential endogeneity of our audit measure and the censoring of our compliance measure using a censored trivariate probit, which we estimate using simulated maximum likelihood. We find that larger facilities and those subject to more stringent regulations are more likely to audit; facilities with poor compliance records are less likely to audit. However, we find no significant long-run impact of auditing on the probability of a regulatory inspection or compliance among these Michigan manufacturing facilities.
Better regulatory compliance through environmental auditing: A reform whose time has passed
Journal of Policy Analysis and Management, 2007
However, under certain conditions, business access costs are higher than residential costs, so that a higher charge is justified on the basis of economic efficiency and equity. B m E R REGULATORY Despite all of the attention devoted to the relative merits of com-COMPLIANCE peting policy instruments for controlling pollution (effluent THROUGH charges, emission offsets, auction schemes, and so on), from a prac-ENVIRONMENTAL tical standpoint, enforcement remains the crucial issue regardless AUDITING: A REFORM of the regulatory regime adopted. Without compliance, even the WHOSE TIME HAS cleverest of control schemes will fail. Unfortunately, government PASSED compliance efforts typically fall into an unproductive mindset about criminal sanctions. Maintaining a "criminal enforcement Stephen H. Under presence" is thought to deter unlawful pollution just as it deters any other legally proscribed conduct. Given this mindset, the seriousness of enforcement is measured more by the magnitude of the sanction and the tone of the rhetoric, than by the likelihood of detection. Threats and disproportionate sanctions are accompanied by hostility and confrontational tactics, creating a climate of regulatory unreasonableness which undermines control objectives. This approach has been both costly and counterproductive.' Ironically, proposals to reform this system adhere to the same logic but merely restrict the scope of its application: Sure, there are criminals out there, the thinking goes, but there are good citizens too. Accordingly, enforcement efforts can be scaled down by giving the good citizens responsibility for their own compliance. Environmental auditing is one such proposal currently being considered by the federal government and promoted for reducing the costs of both enforcement and compliance.* Although reforms aimed at promoting compliance are badly needed, this reform, like the enforcement approach it builds upon, is premised on a fundamental misconception of the compliance decision. Potential polluters do not apply the same logic as turnpike drivers who come to an empty toll station. Conscience and the other internal constraints on individual behavior cannot be the principal values in a competitive firm's decision calculus. And while economic motivations may overlap with moral ones, they are seldom the same. Thus, reforms premised on notions of individual guilt and fear of potential criminal sanctions represent an unproductive investment of resources better devoted to raising the likelihood of detection.
Can Facilities Police Themselves? Evidence on the Effectiveness of Environmental Auditing
This study uses data from Michigan's Department of Environmental Quality on facilities that have implemented environmental self-audits to determine whether auditing has improved the facilities' compliance with Clean Air Act (CAA) regulations. To account for the potential endogeneity between the audit decision and a facility's compliance behavior, we consider two alternative models: a binary treatment effects model and an endogenous switching model for count data. We find no evidence that audits have a statistically significant effect on the auditing facility's long-term compliance with CAA regulations. However, if the parent firm undertakes an audit at any of its facilities, there is some evidence that the overall level of noncompliance decreases across all facilities. Thus, while an audit at the facility itself may not have a lasting effect on that facility's compliance, the audit may trigger a change in the firm's overall approach to environmental management and thus have a lasting effect on noncompliance at all facilities owned by the firm.
Should you turn yourself in? The consequences of environmental self-policing
Journal of Policy Analysis and Management, 2007
Facilities that self-police under the Environmental Protection Agency's Audit Policy are eligible for reduced penalties on disclosed violations. This paper investigates whether self-policing has additional consequences, in particular whether self-policing reduces future enforcement activity. Using data on U.S. hazardous waste enforcement and disclosures, I find that facilities that selfpolice are rewarded with a lower probability of inspection in the future, although facilities with good compliance records receive a smaller benefit than facilities with poor records. Additionally, facilities that are inspected frequently are more likely to disclose than facilities that face a low probability of inspection. The results suggest that facilities may be able to strategically disclose in order to decrease future enforcement.
Do Carrots Work? Examining the Effectiveness of EPA's Compliance Assistance Program
Journal of Policy Analysis and Management, 2012
The role of compliance assistance in the U.S. Environmental Protection Agency's overall enforcement strategy has been quite variable over the past decade and a half, increasing in prominence under the Bush administration and now slated for significantly reduced funding under the Obama administration. While theoretical models and anecdotal evidence suggest that compliance assistance should play some role in a comprehensive enforcement strategy, to date there has been relatively little empirical evidence on the actual effectiveness of existing compliance assistance programs. To help inform the debate over the appropriate use of compliance assistance, this paper uses data on hazardous waste generators nationwide to assess the effect of federal compliance assistance programs in improving compliance with hazardous waste regulations. The paper also conducts a direct empirical analysis of the relationship between traditional enforcement tools and compliance assistance. The results show that federal compliance assistance efforts do increase compliance, but the evidence does not suggest any consistent relationship between traditional enforcement and compliance assistance.
2008
State-level statutes provide firms that engage in environmental self-audits, and that selfreport their environmental violations, with a variety of different regulatory rewards, including "immunity" from penalties and "privilege" for information contained in selfaudits. This paper studies a panel of State-level industries from 1989-2003, in order to determine the effects of the different statutes on toxic pollution and government inspections. We find that, by encouraging self-auditing, privilege and limited immunity protections tend to reduce pollution and government enforcement activity; however, more sweeping immunity protections, by reducing firms' pollution prevention incentives, raise toxic pollution and government inspection oversight.
Do 'Carrots ' Work? Examining the Effectiveness of EPA’s Compliance Assistance Program
2011
The role of compliance assistance in the U.S. EPA’s overall enforcement strategy has been quite variable over the past decade and a half, increasing in prominence under the Bush administration and now slated for significantly reduced funding under the Obama administration. While many theoretical models and anecdotal evidence suggest that compliance assistance should play some role in a comprehensive enforcement strategy, to date there has been relatively little empirical evidence on the actual effectiveness of existing compliance assistance programs. To help inform the debate over the appropriate use of compliance assistance, this paper uses data on hazardous waste generators nationwide to assess the effect of federal compliance assistance programs in improving compliance with hazardous waste regulations. The paper also conducts a direct empirical analysis of the relationship between traditional enforcement tools and compliance assistance. The results show that federal compliance as...