Emissions rating programme: Environmental impacts and firm behaviour

Several countries have used emissions rating programmes to incentivise industrial plants to comply with emissions standards and maintain low levels of pollution. Such programmes function by using regularly monitored emissions data from major industrial plants to rate firms from the least compliant to the most compliant. Besides making environmental performance more transparent, these programmes create competition amongst industrial units to meet regulations and reduce pollution.

Evidence shows that disclosure of pollution information to the public enables efficient regulations. Providing reliable and transparent data carries additional benefits. It can mobilise the public and civil society as well as investors and shareholders to pressure industrial units towards better environmental performance. It can also force firms to comply with regulations as failure to do so might harm their reputation, risking sales and revenues.

In this backdrop, the researchers propose to collaborate with the Environmental Protection Department, Punjab (EPD) to pilot an emissions rating programme for select industrial units in Punjab. Using an experimental design, the researchers aim to evaluate the impact of the programme on the following firm-specific outcomes:

• Improved regulatory compliance;
• Emissions reduction;
• Adoption of better pollution control devices.

The researchers aim to begin their experiment will by regularly monitoring the emissions of particulate matter of their sample industrial plants. Then they'll randomly assign the sample industrial plants to a control group and a treatment group. Each plant in the treatment group will receive a star rating based on its compliance with EPD’s regulations on emissions of particulate matter, with 1-star denoting least compliance and 5-stars denoting most compliance. During the treatment and post-treatment phases, the researchers will keep monitoring the particulate matter emissions of all their sample industrial plants. To test the impact of the rating programme, they will statistically estimate the average differences in the outcome variables between the treatment group and the control group.

The researchers aim to have the results of the experiment will provide sufficient evidence to the EPD for scaling-up the emissions rating programme by including more industrial units in the programme.