Enforcement and Over-Compliance

Economists generally view environmental enforcement as a tool to secure compliance with regulations. This paper demonstrates that credible enforcement significantly increases statutory overcompliance with regulations as well. We find that many plants with discharges typically below legally permitted levels reduce discharges further when regulators issue fines, even on other plants. Also, likely non-compliant plants often respond to sanctions by reducing discharges well beyond reductions required by law. Thus, increased enforcement generates substantial discharge reductions above and beyond those expected from simply deterring violations.