Monitoring and enforcement: Is two-tier regulation robust? - A case study of Ankleshwar, India

The regulation of industrial pollution is difficult in a rapidly industrialising, low-income setting. This study looks at the efforts to regulate chemical plants in Ankleshwar, the largest chemical estate in Asia. Pollution comes from many sources, the distribution of information is highly asymmetric and the authorities have meagre resources. The location of plants in an industrial estate does however provide interesting preconditions for a form of two-tier regulation, in which industry association becomes an intermediary between regulator and firms. The association is better informed and has an incentive to regulate its members to maintain a good reputation but doesn't possess much formal authority, and its voluntary monitoring and abatement program is akin to managing a common property resource. The analysis of four preconditions for the success of such management - suitable design principles, effective monitoring, objective implementation of rules, and enforcement - indicates that they are satisfied at least partially in Ankleshwar.