خرید و دانلود نسخه کامل کتاب Environmental Regulations and Industrial Competitiveness Case Studies of Toxic Industries in Southern California – Original PDF

7 The mindset of business owners, we argue, is more accurately conceptualized by the concept of “technological uncertainty” (McKenna, 1986).1 There are a conflu- ence of factors that can create technological uncertainty in the minds of business owners in general and during the process of environmental compliance in particular. First, new technologies, including product, process, pollution-prevention, and add- on control technologies, may need to undergo years or decades of testing and modi- fications before their capabilities are fully known. Second, new technologies may necessitate additional steps in the production process that require workers to be trained on new processes over an extended period. Third, it may take a significant amount of time and money for firms to acquire the necessary information to learn how to use new and alternative technologies efficiently. Finally, technological change and innovation often take place through a lengthy process of “learning by doing” involving extensive interaction with, and feedback from, customers and sup- pliers (Nelson & Winter, 1982; Rosenberg, 1994). The sixth problematic issue involves the difficulty of accurately measuring the economic costs incurred by firms and industries for environmental compliance. To begin with, there is no agreed-upon method in economics for measuring the costs of environmental compliance. A common empirical measure used in the literature is the US Census Bureau’s Pollution Abatement Control Expenditures (PACE) survey that asks firms to estimate their capital expenditures and operating costs for environ- mental compliance. The problem with the PACE survey, however, is that firms gen- erally do not keep track of their expenditures on environmental compliance and are inclined to overestimate these costs (Berman & Bui, 2001; Dechezlepretre & Sato, 2017; Jaffe et al., 1995). But there are also some broader reasons why environmen- tal compliance costs are a challenge to accurately assess. In addition, environmental compliance costs are difficult to estimate because the regulatory process is inher- ently political (Rosenbaum, 2019). Polluting industries, for example, rarely accept environmental mandates without a fight and regulators often make regulatory con- cessions long after a particular regulation has been implemented. Finally, the costs of environmental regulations can be difficult to measure as new scientific research concerning the negative health effects of toxic chemicals may establish grounds for strengthening or weakening an existing set of environmental mandates. Finally, economists typically estimate the efficiency of technologies, that is, their costs, benefits, and productive capabilities, at one point in time using cost-benefit analysis (this includes the efficiency of technologies that generate toxic emissions and the technologies that can potentially mitigate them). If the costs of a particular environmental policy exceed the benefits, then the regulation should not be imple- mented because it does not maximize social welfare. This methodological approach is problematic for a number of reasons. Environmental regulators often write a par- ticular regulation with the intention of “forcing” firms to discover new technologi- cal processes for reducing toxic emissions over the course of several years or even decades. It is reasonable to assume that during this time technology innovations 1 Institutional economists typically use the term “economic uncertainty.” Conceptual and Methodological Issues 8 may take place that may fundamentally alter the cost-benefit equation. For example, firms may discover less toxic raw materials to utilize in production, new machinery or new ways of organizing the shop floor, or less expensive add-on control tech- niques that reduce toxic emissions. To quote Porter again: This static view of environmental regulation, in which everything except regulation is held constant, is incorrect. If technology, products, processes, and customer needs were all fixed, the conclusion that regulation must raise costs would be inevitable. But companies operate in the real world of dynamic competition, not in the static world of much economic theory. They are constantly finding innovative solutions to pressures of all sorts – from competi- tors, customers, and regulators (Porter & Van Der Linde, 1995a, p. 120). This framing gives firms more agency in adjusting to new demands. We now turn to a review of the methodological approach that we have taken to this book to assess the effects of environmental regulations on economic competitiveness. Research Methods Our starting point for assessing the economic effects of environmental regulations is the case study approach, specifically, industry-specific analysis of the dynamics of firm responses to a pollutant-specific regulation. Our industry case studies, as noted earlier, are of the metal finishing, wood furniture, and dry-cleaning industries. Each of these industries emits a highly toxic chemical into the ambient air that poses a major health risk to people who live and work nearby. The wood furniture industry emits volatile organic compounds (VOCs), the metal finishing industry emits hexavalent chromium, and the dry-cleaning industry emits perchloroethylene (PERC). Moreover, each industry has been subject to stringent environmental regu- lations for several decades by the AQMD, a regulatory agency created by the state of California in 1977 to be in compliance with the Clean Air Act of 1970. Finally, each industry’s case study, as we noted, concentrates on one particular dimension of economic competitiveness: The metal finishing case study focuses on economic growth, the wood furniture case study focuses on firm relocations, and the dry- cleaning case study focuses on the early adopters of pollution-prevention technologies. Industry case studies, we believe, are a fruitful method for examining the effects of environmental regulations on economic competitiveness for a number of reasons. Firms within an industry use similar product and process technologies that generate toxic pollution (Porter, 1995a; Rosenberg, 1972). For this reason, the EPA fre- quently designs environmental regulations for specific industries because policy solutions to controlling emissions include similar technologies for all firms in an industry. Moreover, industry case studies are informative because the structure of an industry has an important bearing on how efficiently firms will comply with a par- ticular regulatory policy. There are many aspects to industry structure, including the size distribution of firms, product and process technologies, labor and capital 1 Environmental Regulations and Industrial Competitiveness 9 markets, and upstream and downstream linkages with customers and suppliers. Most industries are also represented by associations who may play a crucial role in assisting firms with the regulatory compliance process. We utilized a mix of qualitative and quantitative methods to assess the effects of AQMD regulations on the economic competitiveness of the metal finishing, wood furniture, and dry-cleaning industries. At the heart of our qualitative approach were personal interviews with the owners and managers of firms. The personal interview is an effective avenue for investigating complex questions, including how corporate managers comply with a particular environmental regulation. The interviewer is in a position to ask respondents to elaborate on responses that are not clear or probe into new and unexpected areas of inquiry (Babbie, 2020). The personal interview questions were organized around the following general areas: (1) the background of the firm, (2) the characteristics of the firm and the industry, (3) the technology of the production process, (4) the major technological challenges of complying with the regulations, and (5) the perspectives of business owners toward the regulations. The personal interviews primarily took place at the location of the firms and most of the interviews were recorded. The sample size of the firms interviewed varied among the three industry case studies. In addition to the personal interviews, we utilized the following qualitative meth- ods in our industry case studies. First, we were often given a tour of the facility at the conclusion of our personal interviews and we recorded our observations after- ward through field notes. Second, we conducted telephone interviews with the own- ers and managers of firms. The telephone interviews were brief because respondents, on average, were reluctant to speak at length on the phone. Accordingly, our tele- phone interview questions were focused on the basic challenges firms faced com- plying with the regulations. The sample size of our telephone interviews also varied. Third, we conducted personal and telephone interviews with the leaders of industry associations and key administrative personnel from the AQMD who were knowl- edgeable about the regulation of the industries. Finally, our qualitative analysis involved the use of secondary sources of information, including administrative records, AQMD and EPA reports, industry trade journals, academic books and jour- nals, and mainstream periodicals. Our industry case studies also involved the use of quantitative methods. To begin with, we relied heavily on “industry lists” obtained from Dun and Bradstreet, a private company that collects information on firms and industries in the US econ- omy. The lists contained the name, address, and telephone number of each firm located in Southern California as well as information on firm size, revenues, and ownership characteristics. We used the industry lists to draw a random sample of firms for our personal and telephone interviews and to help with our analysis of the industries at the firm level. Additionally, we used data from the Bureau of the Census to assess economic trends in each of our industries, including County Business Patterns and the California Employment Development Department. We also obtained databases from the AQMD that included the compliance status of firms in each of the industries. Finally, our quantitative methods for each of our industry case studies included basic descriptive statistics and multivariate analysis. Research Methods 10 Concluding Remarks The book’s main goal is to improve our understanding of the effects of environmen- tal regulations on economic competitiveness. Accordingly, our aim is to reveal the institutional process by which firms comply with environmental regulations. By doing so, we complement the existing literature. Our effort is not merely an aca- demic exercise. We believe that the research findings can inform environmental policy makers on how to design effective regulations that will reduce environmental pollution while also minimizing the negative economic effects on firms and indus- tries. It is imperative for governments in all societies in the twenty-first century to take aggressive steps to reduce industrial pollution as a key component to address the looming environmental crisis. One of our objectives in writing this book is to present the industry case studies in a way that is clear and understandable to scholars and students from diverse aca- demic disciplines. As we noted earlier, the empirical research assessing the effects of environmental regulations on economic competitiveness has been conducted pri- marily by economists using complex econometric models. While informative, these models can be difficult to understand, particularly for those without formal aca- demic training in econometric methods. 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Environmental Health Perspectives, 129(3), 1–12. 1 Environmental Regulations and Industrial Competitiveness 14 Fig. 2.1 History of the AQMD in broad outline and cancer. Because of these dangers, each industry has been highly regulated by the South Coast Air Quality Management District (AQMD) for several decades. The rest of this chapter reviews the history and policy context of the AQMD. AQMD’s history, shown in broad outline in Fig. 2.1, begins with the emergence of severe air pollution in the city of Los Angeles in the early 1940s as the region experienced rapid population and economic growth. To alleviate the problem, the Los Angeles County Board of Supervisors created the Los Angeles County Air Pollution Control District (APCD) in 1947, the first regional air-quality control agency in the country. As air pollution became a national problem during the 1950s and 1960s, local air-quality control agencies emerged throughout the country. However, this localized approach proved insufficient because it was impossible to control windborne pollution from neighboring jurisdictions. Congress passed the Clean Air Act of 1970, legislation that authorized the development of comprehen- sive federal and state regulations to limit emissions from stationary and mobile sources of air pollution. The state of California created the AQMD in 1977 to be in compliance with the ac