> POLICY RESEARCH WORKING PAPER 1710

# Summary findings

Formal regulation of industrial pollution control standards has been hampered in some developing countries by the absence of a clear regulatory framework, by limited institutional capacity, and by limited information on emissions. For many manufacturing facilities in developing economies, the governmentimposed "price of pollution" is zero.

Yet Hartman, Huq, and Wheeler find strong evidence that despite weak or nonexistent formal regulation and enforcement of environmental standards, many plants in South and Southeast Asia are clean. Of course, many plants are also among the world's worst polluters. To account for the extreme variation among plants, the authors review evidence from a survey of pollution abatement by 26 pulp and paper plants in four countries: Bangladesh, India, Indonesia, and Thailand.

They find that the level of pollution abatement is significantly affected by three factors. Abatement is:

* Positively associated with scale and competitiveness.

* Negatively associated with public ownership.

• Unaffected by foreign links (in ownership or financing).

communities successfully pressure plants to abate pollution even if they have little or no support from formal regulation. High local income is a powerful predictor of effective informal regulation.

The authors also find that policy matters. Privatization, to the extent that it increases plant efficiency, can significantly improve environmental performance. As private ownership, competitiveness, and per capital incomes rise, communities may be in a better position to exert strong local pressure on polluting facilities to clean up production.

The government may need to intervene to prevent environmental injustice in communities whose citizens are mostly poor, poorly educated, or members of marginalized minority groups (and hence less capable of applying local pressure on firms and less likely to be knowledgeable about pollution). To compensate, national regulators may want to consider strategies for improving participation in pollution control in those communities, and for targeting regulation to the problems of poor communities.

A clear source of interplant differences is the level of community pressure, or informal regulation. Some This paper - a product of the Environment, Infrastructure, and Agriculture Division, Policy Research Department - is part of a departmental study funded by the Bank's Research Support Budget, "Enterprise Ownership and Pollution" (RPO 677-44). Copies of the paper are available free from the World Bank, 1818 H Street NW, Washington, DC 20433. Please contact David Wheeler, room N10-023, telephone 202-473-3401, fax 202-522-3230, Internet address dwheelerl@worldbank.org. January 1997. (37 pages) _The Policy Research Working Paper Series disseminates the findings of work_ **_in_** _progress to encourage the exchange of ideas about development issues. An objective of_ **_the_** _series is to get the findings_ **_out_** _quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represen_ **_t_** _he view of the World Bank, its Executive Directors, or the countries they represent._ Produced by the Policy Research Dissemination Center