Alternative Pollution Control Policies in Developing Countries: Informal, Informational, and Voluntary

In developing countries, weak environmental regulatory institutions often undermine conventional command-and-control policies. As a result, these countries are increasingly experimenting with alternative approaches that aim to leverage nonregulatory “green” pressures applied by local communities, capital markets, and consumers. This article reviews three strands of the empirical literature on this trend. The first strand examines the direct impact of nonregulatory pressures on developing country firms’ environmental performance. The second and third strands analyze policy innovations reputed to leverage these pressures -- public disclosure and voluntary regulation. I find that the econometric evidence that nonregulatory pressures have had a direct impact on firms’ environmental performance is thin, at least partly because disentangling such impacts is inherently difficult. Nevertheless, existing empirical research suggests that public disclosure programs have spurred emissions reductions by particularly dirty firms. The evidence on voluntary regulatory policies is far more mixed. Taken as a whole, the literature suggests that policymakers would do well to exercise caution in promoting and implementing alternative pollution control tools: they are only likely to be effective in some incarnations and situations.