Environmental Racism

egulatory pressure comes from regular inspections to detect non-compliance, and from
enforcement actions intended to bring non-compliant plants into compliance. The
allocation of these inspections and enforcement actions is the focus of our analysis.
In the United States, environmental policymaking occurs via a system of environmental
federalism. At the federal level, the U.S. Environmental Protection Agency (EPA)
promulgates national regulations and, for the most part, each individual state is
responsible for implementing and enforcing those regulations. The responsibility of the
states to implement and enforce regulations provides them significant flexibility to
allocate varying degrees of regulatory pressure on polluting plants, even though their
activities are monitored by the EPA. More specifically regarding air pollution, state
regulators have the responsibility and authority to write the State Implementation Plans,
which identify permitted air emissions at individual facilities, in order to meet ambient air
quality requirements. Furthermore, the overwhelming majority of air pollution
inspections and enforcement actions are executed by state, not federal, regulators. The
major role state-level decision-makers play in carrying out environmental policy makes it
more likely that local political pressures could influence regulatory activity (relative to a
centralized system).
Optimal regulations would maximize social welfare by setting environmental standards
so that the marginal benefit from pollution abatement equals the marginal cost of
*
abatement. In equation (1) below, optimal abatement values, A i , will be different for
each plant due to factors that influence the marginal benefits and marginal costs of
abatement. The marginal benefits of pollution abatement vary across plants primarily
due to the number (and characteristics) of the people who live near the plant and
therefore are exposed to its emissions. On the other hand, the marginal costs of abatement
vary across plants largely due to their production technology, size, and age. If we make
the standard assumption that marginal abatement costs increase with abatement intensity
(or at least intersects the marginal benefits curve from below), plants with higher
marginal benefits (or lower marginal costs) should perform more abatement. If A* is the
optimal abatement level, we have d A * i /dPLANT i 0 for PEOPLE characteristics that increase
marginal benefits.
(1) MC (PLANT i , A i*)
= MB(PEOPLE i,
A i*)
The focus of our study is on how the differences in the marginal benefits of pollution
abatement (MB i ) across plants affects regulatory activity, but we also control for plant
characteristics affecting marginal abatement costs (e.g. size, fuel use etc). We model the
marginal benefit function by aggregating individual marginal benefits from pollution
abatement for all people living around a plant, as shown in equation (2) below. The
locations of the people are indexed by x and y. The marginal benefits MB i from pollution
abatement at a given plant are largely a function of the number of people in the area
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