Private Regulation on the Environment
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© Copyright 2012 by Lily Hsueh All rights reserved. Private Regulation on the Environment: Bilateral Voluntary Agreements in U.S. Toxic Chemical Policy Lily Hsueh A dissertation submitted in partial fulfillment of the requirements for the degree of Doctor of Philosophy University of Washington 2012 Reading Committee: David Layton, Chair Leigh Anderson Aseem Prakash Craig Thomas Eric Zivot Program Authorized to Offer Degree: Evans School of Public Affairs 2 ABSTRACT Private Regulation on the Environment: Bilateral Voluntary Agreements in U.S. Toxic Chemical Policy by Lily Hsueh Doctor of Philosophy in Public Policy and Management University of Washington, 2012 Professor David Layton, Chair In recent decades, in the backdrop of highly constrained government and public sector finances worldwide, private forms of regulation in natural resource and environmental policy have gained political and public salience: there is an increased interest in governance with government rather than governance by government. This dissertation, consisting of three essays, investigates the policy impact of bilateral voluntary agreements, one form of voluntary environmental programs, and the compliance-related decision-making processes involving regulators, corporate actors, and NGO activists that have led to them. The first essay of the dissertation examines the effectiveness of a bilateral voluntary agreement negotiated between the U.S. EPA and the pressure-treated wood industry to ban the use of a poisonous arsenic compound. Unlike earlier studies on voluntary programs, results from dynamic panel estimation and advanced time series techniques show that the voluntary agreement has lowered arsenic use in the U.S. to levels not seen since the 1920s. Moreover, a government-driven information disclosure policy—namely the EPA’s Toxic Release Inventory—was effective in decreasing i arsenic use, albeit to a lesser magnitude than the industry voluntary ban. Prioritizing environmental protection through financial resources, as measured by Congress-allocated dollars to the EPA, has also reaped environmental benefits. Systematic surveys of key stakeholders provide institutional, political, and economic insights into the impact estimates of the bilateral voluntary agreement on arsenic use. Policy process tracing based on the survey data shows that the pressure-treated wood industry was compelled to engage in beyond-compliance action given the existence of a poison- free substitute, market competitive pressures, and the threat of future regulation. The EPA regulators casted a shadow of public law with the credible threat of future regulation by “steering” or encouraging voluntary action and sanctioning noncompliance once the voluntary beyond compliance action had occurred. Moreover, third-party stakeholders, such as NGO activists, played an important “accountability” role by pressuring for and certifying firms' beyond compliance environmental stewardship. In the second essay, I develop a theoretical framework by building on the multiple streams framework (Kingdon, 1984) to explain the compliance-related decision-making processes and apply it to two cases of “successful” bilateral voluntary agreements in mercury and arsenic use, respectively. Specifically, to the problem, policy, and politics streams of the multiple streams framework I add an economy stream and delineate its key variables. I argue that the economy stream demarcates the roles that product substitutes, market competition, corporate social responsibility, the market changer, and the global economy play in creating incentives for businesses to partake in industry self-regulation. The market changer is a maverick business that engages in an action or a set of actions that completely transforms the modus operandi of the industry in which the market changer operates. While both bilateral ii voluntary agreements achieved the negotiated chemical reduction objectives, the push and pull of politics, economics, as well as institutional factors led to two distinctive bilateral voluntary agreements: one was an outcome of industry voluntary stewardship and the other was a result of activist campaigns. The final essay employ recently developed, state-of-the-art structural change and unit root tests, as well as cointegration analyses to investigate whether federal regulations since the 1970s have had an effect on toxic chemical use and what the time series properties of the data reveal about policy efficacy over the long-run. I examine whether there is a long-run equilibrium relationship among chemicals that are regulated under the same laws and whether there are clusters of chemicals (e.g., end-use sectors that use the same chemicals) that share a common trend, which could suggest common economic and institutional drivers. Results indicate that while some toxic chemicals have been successfully reduced or phased-out by regulatory efforts, a majority of the toxic chemicals used in commercial products are largely driven by changes in U.S. GDP, industrial production, and private investments in research and development, rather than by common political, economic, and institutional factors, such as government regulations. iii ACKNOWLEDGEMENTS I am honored and indebted to so many kind, intelligent, and wise individuals who have taken an interest in my intellectual development. This dissertation stands on these “shoulders of giants.” I first thank the members of my supervisory committee: David Layton (Chair; Public Affairs), Leigh Anderson (Public Affairs), Aseem Prakash (Political Science), Craig Thomas (Public Affairs), and Eric Zivot (Economics). Their guidance, advice, and support have been invaluable and replaceable. I have learned from these teachers, advisers, and scholars how to ask the right questions, collect and analyze data, research, and write with both rigor and humility. I have also benefited from the advice and expertise of Tim Bruckner, Joseph Cook, Laura Evans, Susan Gunn, Kirsten Foot, Crystal Hall, Roselyn Hsueh, Raul Lejano, Maureen Pirog, and Bill Zumeta, as well as participants at seminars and conferences at various stages of the dissertation process. I thank my fellow graduate school cohorts at the Evans School and the University of Washington for pacing me and rooting for me on this PhD marathon. The Evans School staff has been phenomenal in providing logistical, technical, and at times moral support. Generous financial support came from several sources at the University of Washington. Moreover, I acknowledge and thank the government officials—administrators, analysts, and regulators—as well as managers and staff at corporations and environmental NGOs for sharing their expertise and insights with me. Without access to the substantive knowledge of these informants and the data to which they granted me access my research would not have been possible. Finally, I thank Joseph Huang, my husband and co-parent of our twin toddlers, Hope and Faith, for his unwavering confidence and support in my abilities and endeavors. This dissertation would not have come to fruition without him. iv DEDICATION I dedicate this dissertation to my father, Tse-Huang Hsueh, who has instilled in me a fondness and respect for the environment and a conviction for environmental protection and stewardship. I also dedicate this research to my mother, Pauline Lee Hsueh, who has taught me the importance of synthesizing seemingly diverse ideas and ideals for understanding and solving multi-faceted problems confronting our society today. v TABLE OF CONTENT CHAPTER 1. INTRODUCTION AND OVERVIEW ............................................................ 9 CHAPTER 2. BEYOND REGULATIONS: INDUSTRY VOLUNTARY BAN IN ARSENIC USE ................................................................................................................. 17 CHAPTER 3. BUILDING ON THE MULTIPLE STREAMS: MARKETS, ACTORS, AND INSTITUTIONS OF THE ECONOMY STREAM .......................................................... 84 CHAPTER 4. ENVIRONMENTAL REGULATORY EFFICACY AND THE LONG-RUN POLICY HORIZON: THE CASE OF U.S. TOXIC CHEMICAL POLICY ................. 145 CHAPTER 5. CONCLUSION............................................................................................. 270 REFERENCES ..................................................................................................................... 276 VITA ..................................................................................................................................... 287 vi CHAPTER 1. INTRODUCTION AND OVERVIEW Experimentation with alternative, incentive-based governance approaches that devolved regulation to the states and the private sector began with President Regan’s “Environmental Federalism,” and have continued into subsequent presidential administrations. In recent decades, in the backdrop of highly constrained government and public sector finances worldwide, private forms of regulation in natural resource and environmental policy have gained political and public salience: there is an increased interest in governance with government rather than governance by government. Private regulations employ private, nongovernment, or market-based regulatory frameworks to govern multinational firms and global supply networks (Vogel, 2010). A defining feature of private regulations is that their legitimacy, governance, and implementation are not necessarily rooted in government authority, although government continues to play an important role, notably in incentivizing businesses to