Emissions rating programme: environmental impacts and firm behaviour in Pakistan

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 shareholders and investors 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.

We have collaborated with the Punjab Environmental Protection Department (PEPD) to pilot an emissions rating programme for select industrial units in Punjab. Using an experimental design, we will evaluate the impact of the programme on the following firm-specific outcomes:

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

We will begin the experiment by regularly monitoring the emissions of Particulate Matter (PM) of our sample industrial plants. We will then randomly assign our 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 PEPD’s regulations on emissions of PM. To test the impact of the rating programme, we will statistically estimate the average differences in the outcome variables between the treatment group and the control group.