Case study evidence that direct regulation remains the main driver of industrial pollution avoidance and may benefit operational efficiency

Environmental regulation is required to reduce industrial pollution to levels that are socially acceptable and economically efficient, but there is debate over the most efficient form of such regulation. Typically, a limited range of environmental and economic parameters are accounted for in the econometric studies that inform that debate. This paper integrates evidence from two separate studies to assess a broad range of parameters related to the efficiency of industrial environmental regulation. Questionnaire responses from 25 Italian manufacturers of building-chemicals and 28 Irish pharmaceutical manufacturers provided evidence on the environmental effectiveness and operational impacts of different regulatory instruments. Combined with extensive emissions data from Irish pharmaceutical manufacturers, survey results enabled a quantitative estimation of pollution avoidance specifically attributable to direct regulation. The monetised social benefit of avoided pollution was found to be equal to direct compliance costs. Chemical manufacturers in Italy and Ireland stated that direct regulation is a more important driver of industrial environmental performance than economic or voluntary regulation, and their responses indicated that direct compliance costs may be countered somewhat by stimulated operational improvements. It was concluded that direct regulation is an effective approach for multi-pollutant control in an industrial context, and that the efficiency of such regulation may be underestimated in studies that do not consider the full range of pollutants and operational effects.