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Abstract

When explaining regulatory policymaking and the behavior of regulated business firms, scholars have supplemented economic models by emphasizing the role of public-regarding entrepreneurial politics and of normative pressures on firms. This article explores the limits of such entrepreneurial politics and “social license” pressures by examining regulation of emissions from diesel powered trucks in the US. We find that the economic cost of obtaining the best available control technology – new model lower emissions engines – has: (i) limited the stringency and coerciveness of direct regulation of vehicle owners and operators; (ii) dwarfed the reach and effectiveness of the governmental programs that subsidize the purchase of new less polluting vehicles; and (iii) elevated the importance of each company’s “economic license”– as opposed to its “social license”– in shaping its environmental performance. The prominence of this “regulatory compliance cost” variable in shaping both regulation and firm behavior, we conclude, is likely to recur in highly competitive markets, like trucking, that include many small firms that cannot readily either afford or pass on the cost of best available compliance technologies.
Compliance costs, regulation, and
environmental performance: Controlling
truck emissions in the US
Dorothy Thornton
School of Public Health, University of California, Berkeley, CA, USA
Robert A. Kagan
Department of Political Science and School of Law, University of California, Berkeley, CA, USA
Neil Gunningham
Fenner School of Environment and Society and Regulatory Institutions Network, Australian National University,
Canberra, Australia
Abstract
When explaining regulatory policymaking and the behavior of regulated business firms, schol-
ars have supplemented economic models by emphasizing the role of public-regarding entrepre-
neurial politics and of normative pressures on firms. This article explores the limits of such
entrepreneurial politics and ‘‘social license’’ pressures by examining regulation of emissions
from diesel powered trucks in the US. We find that the economic cost of obtaining the best
available control technology – new model lower emissions engines – has: (i) limited the strin-
gency and coerciveness of direct regulation of vehicle owners and operators; (ii) dwarfed the
reach and effectiveness of the governmental programs that subsidize the purchase of new less
polluting vehicles; and (iii) elevated the importance of each company’s ‘‘economic license’’ – as
opposed to its ‘‘social license’’ – in shaping its environmental performance. The prominence of
this ‘‘regulatory compliance cost’’ variable in shaping both regulation and firm behavior, we
conclude, is likely to recur in highly competitive markets, like trucking, that include many
small firms that cannot readily either afford or pass on the cost of best available compliance
technologies.
Keywords: air pollution, diesel emissions, compliance costs, regulatory policy-making, regulatory
compliance.
Introduction
Two theoretical problems run through the literature on regulation: What is the relative
importance of economic versus social pressures in: (i) shaping regulatory programs; and
(ii) influencing how responsive (or resistant) regulated enterprises are to regulatory laws
and norms? This article reports the results of an empirical study of the regulation of
emissions from heavy-duty diesel trucks in the US. As a single case study, it cannot
provide any definitive answer to the two problems. But the study casts some light on
Correspondence: Robert A. Kagan, Center for the Study of Law and Society, University of
California, Berkeley, CA 94720-2150, USA. Email: rkagan@law.berkeley.edu
Accepted for publication 14 July 2008.
Regulation & Governance (2008) 2, 275–292 doi:10.1111/j.1748-5991.2008.00043.x
ª2008 The Authors
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both issues by pointing to the kind of regulatory environments in which one significant
economic variable – the magnitude of the costs to regulated firms of meeting regulatory
objectives – is likely to be a dominant causal factor both in policymaking and in influ-
encing individual firm behavior.
1. Two regulatory dilemmas
The traditional ‘‘market failure’’ theory of regulation holds that government regulation is
necessary, and often comes about, when markets fail to provide the information that
individuals need to protect themselves from harm and injustice, or to correct for the
frequent negative side effects of or externalities of business activity (Coglianese & Kagan
2007). In contrast to this ‘‘public interest theory’’ of regulation, the ‘‘public choice’’
theory, most prominently propounded by economist George Stigler (1971), is that
regulatory programs, at least in the US, are shaped by an economic logic. In the frag-
mented US political party system, where members of Congress must seek their own
campaign funds to retain office in frequent elections, legislators depend on support from
organized interest groups. Moreover, the logic of collective action (Olson 1965) holds
that concentrated groups, such as potentially regulated businesses, have an inherent
organizational advantage vis-a
`-vis diffuse, unorganized interests in delivering support
and information, and hence in influencing Congress. Using that advantage, the ‘‘public
choice’’ theory goes on, concentrated business interests induce Congress to enact or add
amendments to regulatory statutes that shield those businesses from competition,
enabling them to gain economic rents at the expense of diffuse, unorganized interests
and the society at large. Furthermore, public choice theorists assume, concentrated
interests use their organizational and other advantages to influence policymakers in
regulatory agencies, both directly and by mobilizing their political allies in Congress
to lean on agency officials.
But challenging that economic ‘‘producer dominance’’ theory, some political scien-
tists and legal scholars have offered a ‘‘neo-public interest’’ account of regulation. They
point out that the political influences on regulatory policy design and on agencies – and
hence on regulatory outcomes – are more diverse. Not infrequently, these scholars
observe, regulatory laws are shaped by ideologically motivated policy entrepreneurs –
politicians, regulatory officials, advocacy groups – who fight for laws and regulations that
do protect diffuse, unorganized interests, such as those who would benefit from strict
environmental regulation (Wilson 1980). Such policy entrepreneurs can overcome the
advantages of concentrated business interests, for example, by exploiting the broad based
social pressures and political demands that arise in the wake of widely publicized disasters,
scandals, or disturbing research findings (Rothenberg 1994; Bardach & Kagan 2002, pp.
22–25; Levine 2006, pp. 217–223). Moreover, post-1960s administrative law, it is argued,
grants regulatory policymakers a good deal of independence from members of Congres-
sional and industry group pressure, compelling them to base regulations on reliable data
and rational policy analysis (Croley 2008). Thus, it is argued, regulation often – but not
always – emerges from a process that is more pluralistic, more responsive to widespread
social expectations, more likely to serve the public interest than the economists’ producer
dominance image of the process (Farber 1992; Croley 2008). Left unclear is when and
under what conditions the political entrepreneurs and rational regulatory officials or the
concentrated regulated business groups get the upper hand in shaping regulation.
1
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In addition to this ongoing debate, it seems likely that a third causal dynamic – what
we call the ‘‘regulatory compliance cost theory’’ – would play a role in regulatory regime
design. Even if public opinion, as articulated by policy entrepreneurs, provides the
impetus for enacting many regulatory regimes, economic factors still matter. One could
hypothesize that the more ambitious the proposed regulatory standard is, the more it
threatens to change or disrupt existing ways of living and doing business, and the more
costly and technically difficult it is for regulated businesses to comply with, then the more
likely it is that affected groups or businesses will protest and that democratic politicians will
moderate the stringency of proposed regulations. Regulatory rule makers, attentive to
their political overseers and funding sources, would do the same.
2
Stringency may be
moderated because politicians dislike being charged with passing laws whose social costs
exceed their social benefits – a good public-regarding reason. But stringency also may be
moderated if the political costs of imposing significant levels of disruption are seen to be
too high. Thus it is common for new environmental regulatory regimes to impose tougher
controls on new facilities than on those long in existence, due to the higher cost of retro-
fitting old ones (Nash & Revesz 2007), and also to impose less demanding requirements on
small businesses, which find it much harder to afford to comply in full (Gunningham 2002;
Johnston 2006). In this way, economic factors not infrequently trump idealism or public
opinion in shaping regulatory rules. But, not always, as indicated by the analyses showing
that many regulatory statutes and rules impose compliance costs that are far higher than
necessary or even exceed likely social benefits (Hahn 1996; Yandle 1999).
It seems clear, therefore, that none of the theories propounded always holds; they
merely point to causal factors or variables that often matter and that interact in shaping
regulation. The challenge is to figure out under which conditions each of the factors
mentioned – the influence of concentrated business interests; broad based public desires
as advanced by policy entrepreneurs; or the relative economic cost of regulation – are
likely to play the most prominent role in the politics and design of regulatory regimes.
Yet another dilemma concerns the relative importance of economic variables and
social pressures in affecting business response to regulatory programs and goals. With
respect to individual firm behavior, traditional economic theory has held that business
firms are ‘‘amoral calculators’’ who spend time and money on complying with regula-
tions only to the extent that the threat of costly legal sanctions, discounted by the
probability of detection and punishment, outweigh the costs of compliance. This theory
implies that regulated firms will not spend money on achieving regulatory goals, such as
environmental protection, that are not required by law at all, unless they think they can
cut costs or improve market share by doing so. Sociolegal studies of regulation and
compliance, however, illustrate a more complicated ‘‘criminology of the corporation’’
(Kagan & Scholz 1984); they have shown that compliance efforts are not driven entirely
by the risk of detection and punishment (Thornton et al. 2005), and indeed are common
even when enforcement risk is fairly remote. Many firms spend money on ‘‘beyond
compliance’’ environmental measures even when there is no clear positive return on
investment (Gunningham et al. 2003). To explain this, sociolegal scholars have pointed
to the role of social norms (Vandenberg 2003) and of ‘‘social license’’ pressures – that is,
direct pressures on firms from employees, neighbors, activist organizations, and the news
media (Gunningham et al. 2004; Vogel 2005). Many business firm managers, these and
other studies have shown (May 2004), are concerned about their own and their firms’
reputation for law-abidingness, or for being a good environmental citizen. But this is not
Compliance costs and regulation D. Thornton et al.
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always the case and not for all firms. Again, the question is: under what circumstances do
economic motives versus social and normative pressures dominate in shaping the
response of individual firms to regulatory values?
The research project discussed in this article was designed partly to explore the
limits of ‘‘social license’’ pressures in shaping firm behavior. Our own previous research
concentrated on highly visible, closely regulated industries – such as large pulp and paper
mills, and chemical companies – that have been subjected to a great deal of regulatory
attention. We conjectured, however, that social license pressures and corporate environ-
mental management style (which we had found to be significant variables) might be
less important in settings involving smaller firms that have skimpier economic resources
and receive less direct regulatory attention and social scrutiny (see Lynch-Wood &
Williamson 2007). In those settings, we also hypothesized, the politics of regulatory
design might depart from both the public choice and neo-public interest theories and
be shaped more by the economic costs of compliance – and hence cast new light on
existing theories of regulatory policymaking.
To explore those ideas, we focused on the regulation of emissions from heavy-duty
diesel powered trucks in the US. The trucking industry constitutes a big, tough, and
environmentally important regulatory target. Collectively, the industry operates a ubiqui-
tous fleet of mobile pollution sources. Collectively, their emissions are enormous and
particularly hazardous. Moreover, a large portion of the trucking market is served by
thousands of small trucking firms. For example, in 2005 there were 336,000 heavy-duty
diesel trucks registered in the state of Texas; 38% of them belonged to firms with no more
than 30 trucks, and 24% were owned by 32,000 small companies with 10 or fewer trucks.
Many of these firms operate on small margins. Finally, trucking companies, especially
small trucking companies, have not been a major target of environmental regulation or
of environmental activist groups, so that social license pressures presumably would be
less salient.
Our research design was, first, to trace the political evolution of federal and state
regulatory programs for diesel emissions, using primarily archival sources. At the state
level, we concentrated on two jurisdictions – Texas and California – both large states
with seaports and lots of truck traffic, but with contrasting political climates, especially
with respect to environmental policy in general and vehicular air pollution in particular.
We also gathered statewide data on state programs and age of registered vehicles that
enabled us to compare overall progress in California and Texas in reducing emissions
from heavy-duty diesel vehicles. To study variation in firm level environmental perfor-
mance, we conducted intensive case studies of 16 small or medium-sized trucking
companies, eight in Texas, eight in California, interviewing company officials in their
primary places of business about their operations, motivations, and attitudes. Our
methods in that phase of the study are discussed in Section 3.2.
2. Regulatory context and regulatory design
There are approximately three million heavy-duty diesel trucks in the US involved in
interstate commerce, and far more in intrastate commerce. They are the workhorses of
the economy. Diesel engines are powerful and very durable. A new heavy-duty diesel
truck today costs about $150,000, but a driver can buy an old one for $20,000 or less to
start his own business. Barriers to entry into the market, therefore, are very low. This
D. Thornton et al. Compliance costs and regulation
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generates the economic contours of the regulatory context: a market for a vital service,
but a market that comes very close to perfect competition, with many small firms, intense
price competition, and low profit margins.
Then there are the environmental features of the regulatory context. In 1998, accord-
ing to California’s Air Resources Board (CARB), a typical diesel fueled bus emitted more
nitrogen oxide (NOx) and particulate matter (PM) than would a busload of riders who
drive the same route in individual automobiles. The more diesel emissions are studied,
the more dangerous they turn out to be. California regulators found that fine particulate
matter in diesel emissions (dPM) posed the highest risk of any air contaminant they had
examined. Individual exposures to diesel exhaust are intensified where large numbers of
trucks or buses sit idling their engines, such as near seaports’ marine terminals, highway
choke points, large truck stops, and (with respect to buses) outside schools or large sports
events.
3
A study of post-menopausal women found that living in areas with high levels of
fine particulates had a very substantial risk of death from cardiovascular problems.
4
Reviewing various studies, CARB estimated that PM and another diesel engine pollutant
– are responsible for an average of 2,880 premature deaths per year in California alone.
2.1. Federal regulation
Faced with this regulatory task environment, what have Congress and the US Environ-
mental Protection Agency (EPA) done? First, they imposed technology-forcing emis-
sions reduction standards on diesel engine manufacturers. The Clean Air Act
Amendments of 1990 instructed the EPA to set maximum emissions for heavy-duty
diesel engines, taking both cost and best available technology trajectories into account
(Walsh 1991). Accordingly, as illustrated by Figure 1, the EPA has periodically ratcheted
down the maximum NOx and PM standards for new heavy-duty diesel engines.
6
For
instance, 1992 models had to have maximum particulate emissions that were 50% below
the level of engines produced in the 1980s; 1994 model years had to be still lower. 2007
model year engines had to cut emissions from 1980 levels by more than 95%. To achieve
the 2007 model year standard, a new cleaner-burning diesel fuel was required, so the EPA
also regulated oil refineries, compelling them to make that kind of fuel available by 2005.
In contrast, neither Congress nor the EPA has required owners and operators of
heavy-duty diesel trucks to scrap their old engines and use this gradually improving ‘‘best
available control technology.’’ The basic structure of the Clean Air Act, in place since
1970, authorized the EPA to regulate new model year vehicles and engines, but not in-use
vehicles. Banning, mandatory phasing out, or requiring radical rebuilding of old diesel
engines would have required a fundamental revision of that regulatory structure – a step
that was not prominent in any of the leading proposals or political debates surrounding
the major amendments to the Act in 1977 and 1990.
In effect, therefore, older, dirtier trucks are ‘‘grandfathered in.’’ And as noted, diesel
engines last a long time. So while some companies buy the greener new model year trucks,
there is no restriction on their selling their older (and more polluting) trucks to other
truckers, who can sell their still older (and still more polluting) trucks to other trucking
companies. Nor did Congress give operators of older trucks legal incentives to retrofit or
scrap them, such as by imposing sharply higher annual license fees or taxes on older engines.
The federal laws and regulations, in short, don’t deal with the obvious, hard problem
– getting the old, dirtier trucks off the road. How can one account for this obvious gap in
the federal regulatory scheme?
Compliance costs and regulation D. Thornton et al.
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2.1.1. The economic problem
The standard ‘‘polluter pays’’ regulatory design is based on the theory that the costs of
engineering, purchasing, and using best available technologies will be passed on to the
ultimate users of the products or service in question. Prices will then reflect, or ‘‘inter-
nalize,’’ all the product’s environmental costs. But trucking companies operate in a mar-
ket that comes very close to perfect competition. Profit margins are very thin. The
majority of firms are small, precariously financed, have little pricing power, and can’t
coordinate price increases with others.
7
Hence most truckers can’t expect to be able to
pass on to their customers the cost of new environmental control technology – new or
retrofitted engines. Moreover, a large proportion of firms simply cannot come up with
the capital costs for the best available control technology (a new truck). The general
lesson is that perfect competition of the kind seen in trucking jeopardizes the traditional
‘‘polluter pays’’ regulatory strategy, especially when most regulated enterprises can’t
afford the required control technology.
2.1.2. The political problem
Consequently, banning old, heavily polluting trucks (or accomplishing the same through
high fees or taxes) would destroy tens of thousands of small businesses, in effect confis-
cating their sole business assets (on which many of them owe money). It might also result
in consolidation of ownership in a much smaller number of trucking firms who could
finance the new trucks, leading to less competition, higher rates, and higher shipping
costs – precisely what the deregulation of trucking in 1980 had finally ended. Hence
neither Congress nor the EPA was close to being willing to face the political storm that
could be expected to follow a mandatory, rapid phasing out of older, more polluting
trucks. That was the case even though, by our rough calculations, the aggregate national
cost of replacing the diesel fleet – which would run into the billions of dollars – is still less
than the aggregate monetary benefits of lives saved by reduction of the dangerous
emissions.
8
2.2. Delegating the problem to the states
Faced with the economic and political problems discussed above, what did the federal
government do to accelerate the phasing out of old trucks? First and foremost, it passed
the problem on to state governments. In 2002, after much political contention and
0
Yea
r
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1.0
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2007
1980
2009
NOx
PM
NOx consent decree
Figure 1 Proportional declines in federal NOx and PM diesel engine emissions limits (1980–
2010).
5
D. Thornton et al. Compliance costs and regulation
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litigation (Oren 2006; Croley 2008), the EPA sharply tightened the National Ambient Air
Quality Standards (NAAQS) for ozone and fine particulates. NOx, a precursor of ground
level ozone, is one of the major emissions of diesel engines, and diesel trucks, as noted
earlier, are a major source of NOx and particulates. Pursuant to the Clean Air Act, state
governments must file with EPA state implementation plans (SIPs), showing how they
will attain the NAAQS (Tabb & Malone 1997, pp. 368–370). After the new standards
were promulgated, therefore, the EPA could pressure state governments that couldn’t
meet the new PM and ozone standards to do more to phase out the older, more polluting
diesel engines. EPA’s regulatory stick in that regard is its legal authority to cut off federal
highway funds to states that don’t meet their SIP air quality goals.
9
The federal government offered carrots as well as sticks. States could obtain federal
funding for carefully formulated plans that would provide financial subsidies for vehicle
owners who purchased new cleaner vehicles (either new diesel engines or alternative fuel
vehicles) and retired (not resell) the old dirty ones.
2.3. State programs: Texas and California
What did the states do in response? We looked at policy design in Texas and in
California. Texas did comparatively little, partly because, unlike California, it has few
‘‘non-attainment areas.’’ As of the end of 2006, there was still nothing in Texas SIPs or
new regulations that apply directly to trucking companies. Texas did establish a sub-
stantial subsidy program,however, using state as well as federal funds.
California has been more aggressive. As in the case of automobile emissions, strong
demand for lower emissions from smoggy Los Angeles and Riverside Counties have
driven state policy, since populous southern California has so much electoral power in
Sacramento. Thus California adopted its own progressively tighter standards for new
diesel engines,paralleling and occasionally leading federal regulations. California regu-
lations require truck fleet owners to perform annual tests on their own vehicles (to
prevent extra emissions due to poor maintenance); state officials periodically inspect
fleets to see that this is done. CARB also deploys roadside ‘‘strike teams’’ of inspectors
who move from locality to locality to pull over and check diesel powered trucks. In
addition, California raised annual registration fees for all motor vehicles to help pay for
subsidies for the purchase of new, lower polluting diesel or alternative fuel vehicles,
although officials directed these subsidies mostly to operators of school bus and urban
transit bus fleets. And after declaring diesel emissions a toxic air pollutant under state
law, CARB imposed restrictions on idling of heavy-duty diesel vehicles, first for school
buses, and in 2005 for commercial trucks.
Most significantly, CARB has also promulgated a series of regulations that require
certain categories of companies to reduce the average age of their fleets – in effect,
a phased-in ban (or compelled retrofitting) of older trucks. CARB required this first
for urban transit buses and garbage trucks – vehicles that operate in residential neigh-
borhoods. In October 2006, CARB extended this requirement to publicly owned diesel
truck fleets (with first actions required by December 2008). In December 2007, CARB
further extended the phase-out requirement to port drayage fleets, bolstering a phased-in
ban of older diesel vehicles in the ports of Los Angeles and Long Beach. In conjunction
with the ban, the ports imposed fees on the beneficial cargo owners of containers moving
in and out of the ports, beginning 1 January 2008; the fees were to be used to subsidize
the purchase of new trucks by private drayage companies.
10
The ports’ phase-out policy
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was driven by local communities’ ability to impede any further port expansion unless
environmental health concerns were addressed (a good example of social license
pressures at work), as well as by the ports’ distinctive ability to regulate access and to
use higher fees on shippers and their customers to subsidize truckers who retrofit engines
or buy new low polluting ones.
The fact remains, however, that as of July 2008 California has proposed phase-out
controls only on the major source of truck emissions – the thousands of over-the-road
private truck companies who operate older diesel trucks in the state. CARB’s proposed
regulation has triggered an active lobbying effort by the California Trucking Association
and the American Trucking Association, seeking to block it or water it down.
2.4. Subsidy programs
Due to its subsidy programs and direct regulations, California has made considerable
progress in reducing diesel emissions from urban bus fleets.
11
But for trucking firms,
which are much more numerous, in both California and Texas, government subsidies
have not been large enough to make much of a dent in the problem of getting older,
dirtier diesel trucks off the roads. By the end of 2006, for example, the State of Texas had
spent $57 million in subsidies,
12
but had replaced only 1,300 trucks. In 2006, there were
approximately still 38,000 trucks in Texas with 1990 or earlier model year engines. If we
extrapolate the average subsidy cost per new green truck in Texas – $44,000 – to all the
38,000 pre-1990 trucks, it would cost $1.7bn in subsidies to get them off the road.
2.5. Implications for theories of regulatory policymaking
From one perspective, the failure of both the federal and the state governments to require
rapid adoption of the best available control technology appears to contradict public
choice theories of the politics of regulatory design. The best organized industries, with
small numbers of very large corporations – motor vehicle engine manufacturers and
petroleum refiners – were subjected to demanding technology-forcing regulations.
13
Trucking companies, a more diffuse industry with thousands of small firms, was not
forced to absorb high compliance costs. That result did not reflect direct interest group
pressure from the trucking industry. Based on the public record, the American Trucking
Association did not play a prominent role in shaping the 1990 Clean Air Act Amend-
ments that authorized the EPA to prescribe progressively tougher emissions standards
for new diesel engines. There was no prominent proposal requiring truckers to use the
newest, greenest engines, and the ATA did not mount either a grassroots or inside
Washington lobbying campaign to block one. Even environmental advocates did not
seem to push for legislation authorizing the EPA to require trucking companies to phase
out old trucks rapidly. It seems likely that environmental groups believed that legislators
would recoil from the political risk associated with enacting a standard that could drive
many small entrepreneurs (in virtually every Congressional district) out of business. In
other words, the controlling factor in shaping the regulatory policy was the sheer eco-
nomic cost of compelling individual truckers to upgrade – an economic explanation, to
be sure, but not the traditional economic theory.
From the perspective of Stiglerian public choice theory, one might imagine that large
trucking firms would have lobbied for regulatory mandates requiring the rapid phase-
out of old trucks, since big firms would be better able to afford the new trucks and raise
rates as thousands of small firms dropped out of the industry. But those pressures did not
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materialize,presumably because many large firms (which dominate the American
Trucking Association) did not relish the thought of incurring a regulatory obligation
to purchase expensive new model trucks while their older ones were still desirable.
Moreover, many large trucking firms rely primarily on subcontracts with small truckers
– and those large firms’ costs could be expected to increase sharply if their subcontractors
were required to buy new green trucks (and the ranks of potential subcontractors were
sharply depleted).
14
Thus the trucking associations neither pushed for more stringent
rules nor played a strong role in structuring the prevailing ‘‘grandfathering’’ of older
trucks and engines. That quiescence on the grandfathering front may be beginning to
change. In 2008 in California when the CARB proposed a regulation requiring all private
trucking firms to modernize their fleets, the ATA and its California affiliate reacted
strongly, mounting a lobbying and public relations campaign to stop or slow down
the regulatory requirement.
15
Of course, while regulatory law has imposed more obligations and costs on the
tightly organized diesel engine manufacturers and refiners than on the more diffuse
and varied trucking industry, a still more populous and diffuse population – asthmatics
and all others who suffer from exposure to high levels of truck emissions – have been
forced to forgo the benefits that a mandatory ‘‘use the best available control tech-
nology’’ rule would have produced. While that result seems consistent with the tradi-
tional public choice theory, we think that in this case the ‘‘regulatory compliance costs
theory’’ of regulatory policymaking is more persuasive. As noted above, the grand-
fathering of existing diesel engines did not stem from the efforts of the trucking
industry. Indeed, truckers did not seem to have to fight hard for their interests at
all. Legislators simply shied away from imposing a regulatory obligation that was so
costly for small truckers to comply with.
In contrast, it should be noted, diffuse environmental and public health policy
advocates were far from powerless. They succeeded in obtaining legislation requiring
progressively more stringent emission standards for new diesel engines and, despite fierce
industry and significant Congressional opposition, to tighten National Air Quality
Standardsfor ozone and particulate matter. The reason they thus far have failed to
win laws and regulations requiring truckers to scrap old diesel engines and obtain
new, greener ones is less the overt political pressure of organized industry groups and
more a fundamental economic (and hence political) factor.
In sum, it is the enormous cost of ‘‘greening’’ the fleet of heavy-duty diesel vehicles –
in the aggregate and for individual firms – that has limited the stringency and coercive-
ness of direct regulation of vehicle owners and operators. Rapid imposition of ‘‘best
available technology’’ requirements on all companies would drive too many firms out of
business to be politically feasible. That politically difficult step has been taken only when
there have been countervailing social pressures and subsidy sources (such as port com-
munities’ threat to limit port expansion and the ports’ capacity to impose fees on
shippers to fund subsidies for truckers).
16
And that same basic economic factor – the
enormous cost of upgrading a huge fleet of vehicles – has dwarfed the reach and effec-
tiveness of the governmental subsidy programs.
All in all, our findings suggest that in populous, highly competitive markets akin to
trucking, the politics of regulatory policymaking is likely to be shaped primarily by the
capacity of most regulated firms to afford and pass on the cost of expensive compliance
technologies.
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3. Company level variation in environmental performance
Progress in reducing harmful emissions from heavy-duty diesel powered trucks ulti-
mately depends on the behavior of the thousands of companies that purchase and
operate the vehicles. Yet as we have seen, those companies are not legally obligated to
buy the newest, ‘‘greenest’’ engines. With rare exceptions, trucking firms are not obli-
gated to reduce idling or adopt other measures (including fuel efficiency measures) that
incrementally reduce emissions. Any rapid improvement of air quality in this sector,
therefore, depends on individual firms’ willingness to engage in what regulatory scholars
have labeled ‘‘beyond compliance’’ behavior.
Another, and major, part of our research, accordingly, focused on trucking compa-
nies. We sought to determine why some firms, but not others, had purchased newer, less
polluting engines and why some, but not others, had adopted day-to-day operating
practices that reduce emissions (such as introducing controls on driving speeds and
idling time, or superior engine maintenance).
3.1. Framework for analyzing company level variation
We approached the problem of explaining company level variation in environmental
performance by using a conceptual framework that was derived from our previous
research (Gunningham et al. 2003). We view facility-level environmental performance
as shaped first of all by the interaction of three elements of a business firm’s environment
– the terms of its economic license (that is, the market based imperatives and constraints
it faces); its regulatory license (that is, legal obligations and threats); and its social license
(that is, pressures from communities, advocacy groups, employees, the news media).
Our prior research also provided clear evidence that these external license pressures are
interpreted, filtered, and negotiated by management attitudes and commitments, which
can vary from indifference or resistance to environmental concerns, to higher levels of
environmental awareness and engagement. Firms’ environmental management styles, we
found, had significant effects on the environmental performance of individual facilities,
reinterpreting, amplifying or dampening the impact of the economic, regulatory, and
social license factors the facility encountered (Gunningham et al. 2003).
Applying this framework to trucking firms, we found, is complicated by the complex
array of technical factors that affect each truck’s (or fleet of trucks’) environmental
performance. Emissions of NOx and PM from a particular diesel engine can vary dra-
matically depending not only on the model year of the vehicle, but also on the ambient
temperature and humidity, the altitude and incline at which the truck is being driven, the
speed and load of the vehicle, the kind of fuel it is burning, and the amount of time the
vehicle idles.
17
Thus regulators’ models of environmental performance posit that in broad
terms, a trucking company’s environmental performance is determined by six basic
factors: (i) the type of fuel used (diesel versus natural gas), as well as the formulation
of the diesel fuel it regularly has access to; (ii) the age distribution of the fleet, qualified by
deterioration in its trucks’ emissions systems over time; (iii) the quality of its maintenance
program; (iv) the average speed at which its trucks travel, as affected by the average time
its fleet spends cruising the highway versus battling traffic on city streets; (v) the amount
of time its trucks, on average, spend idling; and (vi) the number of miles its trucks travel.
18
All of these factors can be affected, of course, by a firm’s economic license, by
regulation, and by company policy. Therefore we conceptualized the six technical or
D. Thornton et al. Compliance costs and regulation
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operating factors as intervening variables situated between the external license factors
and management attitude, on the one hand, and firm environmental performance on the
other, as indicated graphically in Figure 2.
3.2. Firm level research method
We conducted 16 case studies of small and medium-sized trucking companies, focusing
closely in each case on the relationship between the external factors and the six inter-
vening variables. We conducted in-depth interviews of eight firms in California, and
eight in Texas. As in our pulp mill study, we used a small-nsample because of the gaps
and bluntness of most official sources of aggregate compliance-related data, and because
large-nresearch cannot plumb the attitudes and motives of company officials with any
sophistication. The small-nstudy can overcome those problems via in-depth interviews
and access to detailed firm-specific environmental performance data. Gaining access and
conducting on-site interviews is a costly, labor intensive research strategy; a 16-firm
sample seemed the largest feasible, given budget constraints.
We devised a stratified sampling framework to assure that we would get some
medium-sized and some very small trucking firms. Within those categories, in order
to assure that we had some variability, we used state data that provided some indication
of which firms were likely to have good environmental performance (e.g. average age of
trucks) and which were average or poor, and sampled within those subcategories. We
interviewed company owners or operations managers at their primary place of business,
obtaining technical information about their operations (including their relative perfor-
mance on the six intervening variables, their economic license, and management policies
and attitudes).
19
3. Findings
Our most important finding will not surprise most readers. As we had conjectured, in the
extremely competitive trucking market, with many small companies with low regulatory
and social visibility, the firms we studied are driven entirely by the terms of their
economic licenses. Truckers experience little direct scrutiny from environmental regu-
lators with respect to diesel emissions. Social license pressures are weak. Trucking firm
managers’ environmental consciousness is minimal. In some regulatory settings, when
an industry (such as American metal finishing in the US) has been subjected to intense
regulatory scrutiny and enforcement, trade associations or voluntary self-regulatory
arrangements have played a significant role in encouraging better environmental per-
formance by small companies (Gunningham et al. 2004; Johnston 2006). But in the
absence of direct regulatory mandates requiring trucking companies to scrap or upgrade
older diesel engines, social and political pressures have been insufficient to induce state or
national trucking associations to take up that cause. On the contrary, the trucking asso-
ciations are lobbying against California’s proposed phase-out regulation for old engines.
Nevertheless, our field research shows considerable company level variation in envi-
ronmental performance – variation that is determined not by regulatory or social pres-
sures but by economic variables, the specific terms of each trucking firm’s economic
license. Economic license pressures on trucking companies operate on three levels: (i) the
general market – how well the economy is doing, the price of fuel, the price of labor where
the company operates (California generally has more expensive fuel, labor, worker’s
compensation, and other costs); (ii) the particular firm’s market niche – the kinds of
Compliance costs and regulation D. Thornton et al.
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Journal compilation ª2008 Blackwell Publishing Asia Pty Ltd 285
goods being hauled, how far they are being hauled, day-to-day decisions designed to
decrease costs and meet specific customer demands; and (iii) the company level financial
condition. The choices made by a company regarding the determinants of environmental
performance reflect a mixture of these elements, but certain choices tend to be domi-
nated by particular factors.
Table 1 summarizes the impact of a number of economic license factors on company
level fleet characteristics (which in turn influence fleet emissions). The table shows that
most economic factors have both positive and negative effects on emissions. Unfortu-
nately the net effect of each economic factor is difficult to predict in the abstract. And in
our analysis of firm level data, limited by the small size of the sample and the large
number of operating factors affecting firm level emissions, the net impact of each of the
economic variables was unclear.
We measured company level environmental performance in a variety of ways, since
no single summary measure captures it. We estimated each firm’s NOx and PM emis-
sions per truck and per mile, relying both on formulas created by the California Air
Resources Board and on information provided by each company – the age distribution of
its fleet of trucks, average miles driven per year per truck, the quality of the firm’s
maintenance practices, average highway speed of operation (which may be electronically
governed), and the intensity of the company’s controls on idling time. We then ranked
the 16 firms on each measure, and averaged the company’s environmental performance
rankings across all measures.
Using this summary measure, we found that no single explanatory or intermediate
factor dominates. Some companies that report their financial conditions as ‘‘excellent’’
are only middling environmental performers. The same is true for companies in market
niches that encourage younger fleets and better maintenance. Texas and California differ
in terms of the general economy factor (with higher labor costs in California, for exam-
ple), but within each state some companies are excellent environmental performers and
others are weak. Similarly, competition and high fuel prices impel many of the compa-
nies we studied, particularly those based in California, to emphasize fuel economy in
their operations – and fuel economy tends to reduce harmful emissions. But some of our
California companies worked on fuel economy more intensively than others, and hence
had better environmental performance. And as noted above, they did so not to reduce
emissions but in order to control fuel costs.
External license
pressures:
• Legal
• Social
• Economic
Management
attitude
Intervening variables:
company policy/ truck
behavior
• Fuel type
• Fleet age/distribution
• Quality of maintenance
• Highway speed
• Idling
• Distance traveled
Environmental
performance
Figure 2 The relationship between external license pressures, management attitude and environ-
mental performance is determined by a series of intervening variables amenable to regulatory and/
or company policy.
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Table 1 The impact of economic license pressures on company level fleet characteristics that determine truck fleet emissions
Economic factors Effect of economic factors on the determinants of environmental performance
Better emissions Worse emissions
General economy Expanding economy/higher
revenues, more capital
Younger fleet (more capital)
within niche limits
More miles§
More expensive diesel fuel/incentive
for fuel cost controls, less capital
Fuel cost controls /Older fleet (higher costs, less capital)
less idling
better maintenance
better logistics (fewer miles for
same deliveries)
lower highway speed
More expensive labor, workers’
compensation, etc. /Less available
capital, more incentive for
fuel cost controls
Fuel cost controls /Older fleet
less idling
better maintenance
better logistics (fewer miles for
same deliveries)
lower highway speed
Market Niche Long trips/need for more
reliable trucks
Younger fleet More idling
Better maintenance More miles
Sensitive goods /Younger fleet
More reliable trucksBetter maintenance
Customers demand speedy delivery Newer fleet Faster highway speeds
/More reliable trucksBetter maintenance
Company financial condition Company doing well (more capital)Better maintenance
Newer fleet within niche limits
Able to install idling-control equipment
Based on inference.
Based on interview evidence.
§Based on literature.
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Journal compilation ª2008 Blackwell Publishing Asia Pty Ltd 287
To state our findings more generally, trucking companies that had better environ-
mental performance most often did so as a by-product of actions undertaken primarily
for economic reasons, such as avoiding the cost of external repair services, late delivery
penalties, customer complaints about reliability, and rising prices for fuel. We also found
that medium-sized companies – those with more than 100 vehicles – had a higher pro-
portion of newer trucks (2003 or later model year), and they were much more likely than
smaller truck companies to say they were ‘‘doing well’’ economically. This indicates that
size and profitability are also important factors in enabling companies to acquire the
capital necessary to turn over their fleets – and thereby reduce emissions.
4. Conclusion
In the regulation of emissions from heavy-duty diesel trucks in the US, economic factors
have been the dominant factors shaping both company level environmental performance
and the substance of regulatory laws and regulations. More specifically, in an extremely
competitive market such as trucking, dominated numerically by small companies with
low social and regulatory visibility, social license pressures are weak and environmental
consciousness is minimal. Company level variation in environmental performance flows
primarily from economic variables – which induce technological investments and man-
agement practices designed to reduce costs – and may reduce emissions as a side effect.
At the aggregate level, even in a ‘‘green’’ jurisdiction like California, regulators and
politicians have only recently begun to consider direct regulations requiring private
trucking companies – by far the largest source of harmful NOx and PM emissions
to rapidly phase out older, more polluting diesel trucks or engines. The reason, again, is
an economic one. It is the very high cost of retrofitting or replacing older, more pollut-
ing, but still economically useful trucks, a cost that would be multiplied if truckers were
obliged to scrap rather than resell those vehicles. To compel such a costly change would
be both economically disruptive and politically problematic as, unless subsidized, thou-
sands of small truckers would be driven out of business. That cost of compliance factor is
why, we believe, both federal and state regulators have focused on new vehicle emissions
standards while ignoring how long diesel trucks are kept in operation; why they have
shied away from requiring trucking companies (by direct regulation or by fees) to install
best available control technologies and scrap older polluting vehicles; and why they have
focused on subsidy programs that are too small to have more than a marginal impact on
the dangerous emissions of older diesel trucks.
One implication of these findings is that any theory of regulatory policy design and
firm behavior must pay close attention to the cost of reducing the harms sought to be
regulated, particularly how difficult it is likely to be for regulated firms to afford the
initial capital costs associated with compliance and to pass those costs on to customers.
The higher compliance costs associated with retrofitting or reconstituting existing facil-
ities or operations, as compared with new facilities or operations, helps explain the
common tendency of regulators to ‘‘grandfather in’’ existing enterprises and practices
and to impose lighter burdens on small firms. Those policy incentives are exacerbated,
this study suggests, when regulatory change would require large expenditures by small
firms in populous, highly competitive markets. Unless regulators are prepared to main-
tain significant threats of enforcement and sanctions in markets akin to trucking, social
license pressures are unlikely to induce firms to invest in costly harm reduction efforts.
D. Thornton et al. Compliance costs and regulation
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At the same time, even in such industries, as shown in our analysis of particular trucking
firms, certain types of ‘‘market niches’’ induce firms to make ‘‘win–win’’ investments and
adopt practices that both improve earnings and reduce harmful emissions or practices.
Attention to such market niches and the incentives they create may be of significant value
for regulatory policymakers.
Acknowledgments
Thanks are due to the US Environmental Protection Agency STAR-Grant Program for
financial support and to the Center for the Study of Law & Society, University of
California, Berkeley as well. Invaluable research assistance was provided by Matt Hartley
and Bruce Huber. And special thanks go to two anonymous reviewers for their con-
structive comments.
Notes
1 It is of course possible, and indeed quite common, that regulatory statutes are influenced by
both the public regarding political entrepreneurs and the self-seeking industry groups, con-
taining some provisions favored by one, some by the other.
2 This regulatory cost scenario differs from the traditional public choice theory in that it does
not hinge on how concentrated or well organized the affected regulatory targets are. The
threat of unaffordable regulatory costs, in this view, can stimulate mobilization on behalf of
large, unorganized or loosely organized groups, and the anticipation of mobilization of large
numbers of firms may influence legislators and regulatory officials ex ante. Moreover, the
regulatory cost scenario, in contrast to the original public choice theory of regulation, does
not entail interest group mobilization to gain protection from competition or a comparative
advantage over competitors.
3 UCLA researchers found ‘‘Children and adults who suffer from asthma and live near heavy
vehicular traffic are nearly three times more likely to visit the emergency department or be
hospitalized for their condition than those who live near low traffic density. For adults with
asthma, medium to high traffic exposure increases the likelihood of chronic symptoms by
approximately 40–80%. Moreover, living in areas of heavy traffic is a burden borne dispro-
portionately by asthma sufferers who are ethnic/racial minorities or from low-income house-
holds. The issue is more pronounced among children than adults with asthma.’’ (Meng et al.
2006).
4 Miller et al.(2007) found that in 2000, levels of PM2.5 exposure varied from 3.4 to 28.3 mg per
cubic meter (mean, 13.5). Each increase of 10 mg per cubic meter was associated with a 24%
increase in the risk of a cardiovascular event and a 76% increase in the risk of death from
cardiovascular disease.
5 The Act also authorized the agency to promulgate onboard diagnostic control requirements,
designed to ensure that factory set emissions limits are being met continuously (Walsh 1991).
6 NOx emissions in 1993–1998 model years are shown 24% higher than the legal emissions
limit, because most truck manufacturers used software in the electronic engine control mod-
ule of the truck engine to switch to a more fuel efficient (but higher NOx) driving mode when
the truck was not being operated under federal test conditions. This resulted in a lawsuit
charging the manufacturers with using ‘‘defeat devices.’’ The dispute was settled and manu-
facturers in the resulting consent decree agreed to introduce engines meeting the 2004 stand-
ard in 2002.
7 According to the American Trucking Association’s former Vice President for Environmental
Affairs, Allen Schaeffer, low barriers to entry have driven freight rates down to the point that
for every dollar earned, profit levels are about two to three cents, and that margin is easily
Compliance costs and regulation D. Thornton et al.
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Journal compilation ª2008 Blackwell Publishing Asia Pty Ltd 289
eroded by jumps in fuel costs (since most carriers are too small to do anything about hedging
price and are reluctant to add fuel surcharges). Moreover, small companies, Schaeffer thinks,
probably do not charge the full costs of moving goods (e.g. failing to charge for such costs as
drivers’ waiting time) (Interview, 5 December 2006). That situation has surely been exacer-
bated by the very large, sudden increase in diesel fuel prices in 2007 and 2008.
8 Here are our estimates for California, using CARB’s estimate of excess deaths from diesel
emissions.
If a new best pollution technology model currently costs approximately $150,000, replacing
the approximately three million, heavy-duty diesel trucks nationally would cost $450bn.
9 The threat is real enough that in states with ‘‘non-attainment areas,’’ state bureaucrats work
hard to achieve what is called ‘‘transportation conformity,’’ constantly estimating total emis-
sions from transportation sources and searching for regulations that will reduce those total
vehicle generated emissions.
10 The program would allow only port-licensed concessionaires operating ‘‘clean trucks’’ to enter
port terminals without having to pay an ‘‘impact’’ gate fee. ‘‘Clean trucks’’ are defined as 2007
or newer trucks, retrofitted trucks manufactured in 1994 or newer, or trucks that have been
replaced through the Gateway Cities truck modernization program. In addition, the Port of
Los Angeles (not the Port of Long Beach) requires the major drayage firms who use inde-
pendent owner-operators to haul containers to hire those drivers as employees within six
years. By the time the ports’ initiative is completed in 2012, it is expected to cut diesel
pollution from the 17,000 trucks working the waterfront by 80%, and cost $2.4bn (Hanson
2008).
11 According to 2004 data, alternative fuel vehicles constituted 43% of the 10,000+ urban bus
fleet in California, and 17% of the entire diesel bus fleet has had a particulate emissions
control system installed.
12 Costs of vehicle replacements have risen steadily. The average subsidy was $29,364 in 2004,
$43,371 in 2005, and $59,424 in 2006. Original data taken from Appendix 5, Texas Emissions
Reduction Plan (TERP) Biennial Report to the Texas Legislature, December 2006.
13 Engine manufacturers in general are not likely to benefit from technology-forcing mandates
for new engines because they are more costly than earlier models, thereby giving trucking
companies an incentive to keep their old models in use for longer periods of time – which is
the tendency of all regulations that ‘‘grandfather in’’ – rather than require replacement of –
existing technologies (Hsu 2006).
14 Put another way, the American Trucking Association, dominated by large firms, is divided
between members who profit from the intense competition among smaller trucking firms
with cheaper, older trucks, and members who would benefit from a mandatory phase-out. See
generally Levine (2006) (noting who deregulation typically makes firms in an industry more
diverse, and hence likely to have different policy goals). Although the ATA was a powerful
lobby in the 1935–1980 period when all trucking companies were regulated (and shielded
from competition) by the Interstate Commerce Commission (Robyn 1987; Rothenberg 1994)
and thus had many shared interests, in the now deregulated market, there are many more
firms, their interests are more diverse, and in terms of interest group politics, they are a less
cohesive, more diffuse group.
15 In addition, the American Trucking Association did join the larger coalition of manufacturing
and public utility companies that fought fiercely, both in Congress and in the federal courts,
against the EPA’s 1997 regulation reducing National Air Quality Standards for ozone and fine
particulates, which increased pressures on states to reduce diesel emissions.
Deaths per year Number of years Cost per premature death Total cost
3,000 10 $2m $60bn
Trucks in California Cost to replace a truck Total cost
250,000 $150,000 $37.5bn
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16 Where California has compelled the gradual phasing out of old diesel engines – for school
buses, garbage trucks, and other governmental trucks – it has been made possible by the
government’s ability to concentrate its subsidy programs on a smaller subset of vehicles – in
markets in which the regulated entities are relatively free from competition.
17 When one reads estimates of ‘‘grams per mile’’ for a given vehicle’s emissions, they are actually
estimates of emissions over average driving conditions and loads.
18 The relationships among these factors are complex. For example, for some model years,
a cruising speed of 65 miles per hour will result in increased NOx emissions, and for other
model years, a decrease.
19 More specifically, we asked participants to describe: specific policies or practices they had put
in place in order to improve fuel economy; criteria they considered in making truck pur-
chases; what they saw as the industry’s environmental and health impacts; which government
regulations had the biggest impact on their company; what role (if any) government subsidies
had played in their company; and what role environmental agencies, community groups, and
environmental groups had played in the life of the company. We obtained data on the age
distribution of their truck fleet, fuel used (diesel vs alternative), maintenance practices, the
amount of time their trucks idled, policies to decrease idling times, miles per year their trucks
traveled, the speed at which their trucks were governed (or other policies the company had in
place to influence truck speed), and the fuel economy of the fleet. We also asked companies to
rate their own environmental and economic performance on a scale of one (worse than
average) to five (excellent). We asked companies about their prior experience with environ-
mental and safety regulators. We asked for relatively detailed information about the mainte-
nance practices at the company, and technologies the company had considered or adopted
that would impact fuel efficiency and idling.
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Purpose This paper aims to address a topical and controversial issue, namely, the degree of conformity with the new auditor reporting requirements in Australia and the extent of variations in the reporting of key audit matters (KAMs) by Australian firms. Design/methodology/approach This paper compares the 64 elements identified in the applicable standards with the auditor’s report from the sampled companies to determine the degree to which the top 200 firms listed on the Australian Stock Exchange are complying with the requirements of the new audit report. This paper investigates KAM disclosures within and across industries. Findings The results indicate that there is a high degree of conformity with the new reporting framework, yet significant variations in the contents of the report, particularly in KAM disclosures. This paper observes that the number of KAMs and their extent of disclosure generally varies within industries. The types of KAMs presented vary both within and across industries. This paper further provides evidence that auditors have a tendency of not disclosing negative KAMs and tend to avoid negative wordings when describing KAMs. This paper also finds that there are significant differences in the placement of various types of KAMs in the audit report. Practical implications These findings have important policy implications for the standard-setters, regulators, auditors and users of financial reports on the adequacy of the new auditor reporting framework. Originality/value This study is one of the first to examine the degree of conformity with the new audit reporting model in Australia.
... In the past research, most researchers have tended to minimize the traffic congestion and environmental pollution caused by logistics trucks with unilateral benefits rather than overall, which led to a reduction in logistics transportation efficiency [5][6][7][8][9]. Some researches lack quantitative evaluation and analysis using empirical methods in policy development. ...
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In recent years, the prohibition of trucks which could cause environmental pollution on urban roads has become widespread in China. However, some truck restriction policies might lead to a reduction in logistics transportation efficiency. With the help of big data, technology companies have developed many truck applications, such as HCB, truck home, and truck help, to provide the drivers available traffic information. In this context, this paper put forward a truck path optimization model considering environmental impact (TPOM-EI), which is solved by a heuristic algorithm—ant colony optimization (ACO) algorithm. Most previous studies focused on unilateral benefits rather than overall benefits; this paper aims to propose a path optimization model based on real-time minimization of social and transportation costs. Finally, data of Xiqing Economic and Technological Development Zone in Tianjin city (XQ-EDZ) have been used to demonstrate the applicability of the proposed algorithm. The results show that logistics truck path has a huge impact on social costs, and real-time activities in various areas will also change the path of a truck. This research will also help logistics truck drivers to choose the best route in real time.
... Furthermore, since the Coglianese, Nash, and Olmstead (2003) article was published, a few more empirical studies have contributed knowledge on performance-based regulation. 6 Thornton, Kagan, and Gunningham (2008) examine the "technology-forcing emissions reduction standards on diesel engine manufacturers" that the Environmental Protection Agency imposed on new model year vehicles (pp. 275-92), While the maximum emissions standards were strict enough to substantially affect the environmental performance of new diesel engines, the standards did not directly impact in-use vehicles (Thornton, Kagan, and Gunningham, 2008, p. 279). ...
... Literature in this context mainly addresses policy or planning issues [31]- [33] rather than environmental management information systems on a corporate level. However, due to the increasing discussion how transport and logistics companies view environmental management, the question remains which practices and tools are applied to enhance corporate environmental performance [34]- [36]. ...
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Improving environmental performance of road transport through carbon reduction initiatives can be a demand challenge, in particular for Small and Medium Enterprises (SMEs). Whether existing carbon reduction potentials are effectively and efficiently uncovered largely depends on the availability of information as well as on how to make use of it. An often-observed problem is the lack of tools for SMEs to obtain useful carbon-related information from road transport. Against the background of a case study of the carbon-tracking tool CO 2 -Tec, this paper highlights the importance of decision-making information and demonstrates how carbon reduction potentials in road transportation can be uncovered for SMEs. Particular attention is paid to the information needs of the SMEs and how these needs can be fulfilled. The analysis of the results suggests a pattern of action that increases the efficacy and efficiency of information management and use in corporate practice.
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Our study focuses on the value relevance of corporate voluntary carbon disclosure. Our sample includes firms from the United States (listed in the S&P 500) and firms from Brazil, Russia, India, and China that are targeted by the CDP. We examine whether the capital market rewards firms’ voluntary carbon disclosure. Voluntary carbon disclosure is measured as firms’ propensity to voluntarily disclose carbon information and the comprehensiveness and quality of their disclosure. We find that firms with greater carbon disclosure have higher firm value. Furthermore, the positive association between firm value and voluntary carbon disclosure is stronger in developing countries. We also find that large emitters with sufficient carbon disclosure experience a less negative valuation than firms with inadequate carbon disclosure. Furthermore, a subcomponent analysis suggests that the disclosure of specific types of climate risk and opportunity is rewarded by investors and can mitigate the valuation penalty of carbon emissions. These results have important implications for companies, investors, and regulators. Our analyses enhance understanding of the consequences of voluntary carbon reporting, which enriches the reporting of current financial information.
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This study examined the role of enforcement in the promotion of compliance to environmental standards in Ibadan Metropolis. It also identified various enforcement actions of government and investigated the various environmental management tools that promote compliance. This was with the view to identifying the challenges and prospect of enforcement of environmental laws in Ibadan metropolis providing a platform for rapid generation of data for environment related decision making and promoting compliance to environmental standards in Ibadan metropolis. This research focused on the major regulatory authorities overseeing environmental compliance and monitoring in Ibadan. The primary source of data involves the conduct of interview with regulatory bodies in Ibadan Metropolis and the use of properly structured questionnaire. A total of 200 questionnaires were administered to workers of four enforcement agencies in the study area. The data collected from the field was analyzed using descriptive and inferential statistics. The result of the analysis showed that 52% of the respondents indicated that enforcement promotes compliance to environmental laws, 46% of the respondent stated otherwise that enforcement do not promote compliance to environmental laws while 2% of the respondents do not know the effects of enforcement to compliance promotion. Environmental Management Plan (38%), relevant regulations (34%), environmental impact assessment (16%), and environmental audit (12%) were indicated as environmental managment tools used in Ibadan. 33% of respondents stated that environmental management tools are moderately enforced, 30% said they were very effective, 15% said they were not effective, 8% said they don't know, while 6% were indifferent. Also 38% of respondent agreed that enforcement efforts of government were well executed, 26% agreed that it was moderately executed, 22% were undecided. 36% of the respondents agreed that lack of awareness has been hindering the enforcement of statutory environmental legislation, 26% said it was lack of training, 20% said it was inadequate funding, while the remaining percentage 18% said it was poor understanding of legislation. The research concluded that diligent enforcement of environmental laws and relevant management tools promotes compliance to environmental laws and regulations.
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Unconventional gas has quickly become a significant energy resource and a site of contestation over the nature and outcome its regulatory processes. Central to this contest are issues of power and capture and the implications for achieving sustainable energy regulation. The influence of dominant industry players can be a serious obstacle for transitions beyond established energy regimes, and can negatively affect the sustainability of energy policy and implementation. Drawing on interviews across three case studies in Texas, Colorado and Queensland, this article examines perceptions of unconventional gas regulators and regulations. It finds a general view from interviewees that economic interests within the unconventional gas industry have influenced regulation, and that this influence is a significant explanation for the failures of regulation and policy to address a number of environmental and societal concerns. Variations are identified between the cases in terms of the extent of possible industry influence, but all three cases reveal common points of vulnerability, including economic arrangements, suboptimal organisational structures, expertise imbalances, limited agency funding and “revolving doors” of staff. The findings suggest that fully addressing these challenges through law alone will be difficult, and instead highlights three governance pathways that could be pursued beyond state law to achieve more effective and sustainable unconventional gas governance.
Chapter
On the basis of interviews with regulatory agencies and business firms in the United States, we outline three implicit “theories” of why business firms violate the law-economic calculation, principled disagreement, and incompetence. Each gives rise to a different emphasis in enforcement-deterrence, negotiation, and education. Enforcement based on any single theory of noncompliance is shown to be counter-productive when violations occur for one of the other reasons. Flexible enforcement, based on the analysis of the specific cause of each particular violation, is inhibited by technical, bureaucratic and political contraints.