未来能源研究所-通过实物法院解决方案实现环境正义（英）

AddressingEnvironmental

Settlements

PamelaCampaandLucijaMuehlenbachs

JusticethroughIn-KindCourt

WorkingPaper23-21

May2023

ResourcesfortheFuture1

AbouttheAuthors

PamelaCampaisanAssociateProfessorofEconomicsatSITE-StockholmSchoolof

Economics.BeforejoiningSITEshewasanassistantprofessoratUniversityof

Calgary.PamelaholdsaPhDinEconomicsfromtheInstituteforInternational

EconomicStudies(IIES)atStockholmUniversity.SheisalsoaffiliatedtotheMistra

CenterforSustainableMarkets(MISUM)andtheDondenaGenderInitiative.Her

researchinterestsareinpoliticaleconomy,environmentaleconomics,andgender

economics.

LucijaMuehlenbachsisauniversityfellowatResourcesfortheFutureandan

associateprofessorofeconomicsattheUniversityofCalgary.Priortojoiningthe

UniversityofCalgary,shewasafellowatResourcesfortheFuture.Herresearchisat

theintersectionofeconomics,environment,andenergy.Shehasinvestigatedissues

suchasmethaneleaksfromthedistributionsystem,priceshocksintheelectricity

sector,enforcementofoffshoreoilspills,theimpactofshalegaswellsonproperty

prices,theimpactsoftrafficaccidentsassociatedwithshalegastrucktraffic,a

characterizationofthechemicalcompositionofshalegaswastewater,thewater

qualityimpactsonriversandstreams,thedecisiontopermanentlycleanupoiland

gaswells,andtheuseofin-kindsettlementsinenvironmentallawsuitstoaddress

EnvironmentalJusticeconcerns.

Acknowledgments

WethankElisabethNewcombSinhaandNitishRanjanSinhafortheirearlyinsightsintoSupplementalEnvironmentalProjects.WethankCamilleHabe,ErikMerkus,ArthurNovaesdeAmorim,NickWalls,andLongzhouWangforexcellentresearchassistance,KathyBaylis,CatieHausman,SarahJacobsen,AndreasHaller,CoreyLang,LalaMa,YusukeKuwayama,AndreaPolo,GiancarloSpagnolo,StefanStaubli,MargaretWalls,andparticipantsattheEuropeanAssociationofEnvironmentalandResourceEconomistsConference,InternationalInstituteofPublicFinanceAnnualCongress,MontrealEnvironmentalandResourceEconomicsWorkshop,AppalachianStateUniversity,theSwedishUniversityofAgriculturalSciences,theUniversityofAlberta,UniversityofBasel,UniversityofCaliforniaSanDiego,UniversityofKentucky,theMISUM-FinanceInitiative,theUniversityofManchester,SITE,andCEREUmeaUniversityforcomments.ThispaperdrawsonresearchsupportedbytheSocialSciencesandHumanitiesResearchCouncilofCanadaandFORMAS(Dnr2019-01241).

AddressingEnvironmentalJusticethroughIn-KindCourtSettlements2

AboutRFF

ResourcesfortheFuture(RFF)isanindependent,nonprofitresearchinstitutioninWashington,DC.Itsmissionistoimproveenvironmental,energy,andnaturalresourcedecisionsthroughimpartialeconomicresearchandpolicyengagement.RFFiscommittedtobeingthemostwidelytrustedsourceofresearchinsightsandpolicysolutionsleadingtoahealthyenvironmentandathrivingeconomy.

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AddressingEnvironmentalJusticethroughIn-KindCourtSettlements

PamelaCampaandLucijaMuehlenbachs*

May23,2023

Abstract

InUSenvironmentalcourtcases,acashpenaltycanbemitigatedifadefendantvolunteerstoundertakeanin-kindproject,suchasretrofittingschoolbusesorbuildingapublicpark.Agoalofthepolicyistoaddressenvironmentaljusticeconcernsforlow-incomeandminoritypopulations,yetthehistoricalrecordshowsthatin-kindsettlementsaremostlikelytooccurincasesinvolvinghigh-income,majority-whitecommunities.Achoiceexperimentrevealsthepublicprefersin-kindsettlementsovercash,andarandomizedsurveyrevealsthatin-kindsettlementsimprovethepublic’sviewofaviolatingfirm,consistentwithourfindingofpositivestock-marketreactionstoin-kindsettlements.

JEL-Classification:Q58,H23,D63

Keywords:in-kind,environmentalprojects,environmentaljustice,corporatepenalties

*Campa:SITE,StockholmSchoolofEconomicsandMisum.email:pamela.campa@hhs.se.Muehlenbachs:UniversityofCalgaryandResourcesfortheFuture.email:lmuehlen@ucalgary.ca.WethankElisabethNew-combSinhaandNitishRanjanSinhafortheirearlyinsightsintoSupplementalEnvironmentalProjects.WethankCamilleHabe,ErikMerkus,ArthurNovaesdeAmorim,NickWalls,andLongzhouWangforexcellentresearchas-sistance,KathyBaylis,CatieHausman,SarahJacobsen,AndreasHaller,CoreyLang,LalaMa,YusukeKuwayama,AndreaPolo,GiancarloSpagnolo,StefanStaubli,MargaretWallsandparticipantsattheEuropeanAssociationofEnvironmentalandResourceEconomistsConference,InternationalInstituteofPublicFinanceAnnualCongress,MontrealEnvironmentalandResourceEconomicsWorkshop,AppalachianStateUniversity,theSwedishUniversityofAgriculturalSciences,theUniversityofAlberta,UniversityofBasel,UniversityofCaliforniaSanDiego,Univer-sityofKentucky,theMISUM-FinanceInitiative,theUniversityofManchester,SITE,andCEREUmeaUniversityforcomments.ThispaperdrawsonresearchsupportedbytheSocialSciencesandHumanitiesResearchCouncilofCanadaandFORMAS(Dnr2019-01241).

2

Introduction

Courtcasesforcorporatewrongdoingoftenresultinadefendantmitigatingacashpenaltywithanin-kindproject,suchasbycreatingatrainingsessionorapublicpark.IntheUnitedStates,in-kindsettlementshavelongbeenusedincasesinvolvingviolationsofenvironmentalregulations,withonegoalbeingtoaddressenvironmentaljustice(EJ)concernsincommunitieswithlowincomesandahighshareofminorities.Theimplicationsofin-kindsettlementsarenotstraightforward,yetpoliciesontheirusearebeingmadeintheabsenceofanyquantitativeanalysis.

Thispaperprovidesinsightsintoin-kindsettlements,answeringquestionssuchasthefollowing.Whatisthepublic’sperceptionofin-kindversuscashsettlements?Inwhichcommunitiesarecasesmostlikelytosettlewithin-kindprojects?Whataretheimplicationsforthedefendants?Whataretheconsequencesforfutureenvironmentalquality?Weofferguidancetothenow-changingpoliciesonin-kindsettlementsandcontributetothegeneraldiscussionontargetinggoods,EJ,corporateenvironmentalstewardship,andtheefficacyofenvironmentalenforcementactions.

Weestimatetheimplicationsofin-kindsettlementsforfirmsandcommunitiesusingthehistoryofUSfederalenvironmentalcasesettlements.Everyyear,around5,000casesarebroughtagainstdefendantsforviolatingfederalenvironmentalstatutes,suchastheCleanAirActandCleanWaterAct.Inthesettlementofthesecases,theEnvironmentalProtectionAgency(EPA)givesdefendantstheopportunitytoreducetheassessedcashpenaltybyvolunteeringin-kindprojectsinthelocationoftheviolation.Theprojectshavetogoaboveandbeyondwhatwouldbelegallyrequiredofthedefendant.Theyspanawidearrayofenvironmentallybeneficialinterventions,including,leadabatement,retrofittingschoolbuses,emergencyequipmentforthelocalfirede-partment,andupgradesattheviolatingfacility.Typically,everyyeararound56percentofthecasesresultincashsettlements,andaround4percentincludeanin-kindproject.

TheEPAencouragestheuseofin-kindsettlementsincommunitieswithEJconcernsbynam-ingEJasacriticalfactorwhenevaluatingasettlement.WhethertheEPA’seffortsresultincommunitieswithEJconcernsbeingthesiteofmorein-kindsettlementsisnotobviousex-ante.

3

AlthoughEPAguidelinesencouragein-kindsettlementsincommunitieswithEJconcerns,theEPAdoesnothavethestatutoryauthoritytorequireit;theseprojectsmustbevolunteeredbythefirmandthenapprovedbytheEPA.Thenegotiationsbetweenfirmsandtheregulator,withinputfromthecommunity,leaveroomfornon-EJcommunitiestopushforin-kindsettlements.Thispaperprovidesthefirstdescriptionofwhichcommunitiesaremorelikelytobenefitfromin-kindsettlements.Moregenerally,weattempttoshedlightonapolicythattriestocombatenvironmentalinjustice.Althoughthecorrelationbetweenpollutionandsocioeconomicshasbeenwelldocumented(forreviews,see

Mohaietal.

,

2009

,

Banzhafetal.

,

2019b

and

Banzhafetal.

,

2019a

),policiestocombatenvironmentalinjusticedirectlyhavesofarbeenlittlestudied.

1

Wefindthatin-kindsettlementsoccurmostlyincasesinvolvingcommunitieswiththelowestincomesandlargestshareofminorities,buttheyalsooccurincasesinvolvingcommunitieswiththehighestincomesandlowestshareofminorities.OurfindingssuggestthattheEPA’sattempttotargetEJcommunitieshaslessswaythanthesystemicfactorsthatdeterminesettlementdecisions.

Next,weinvestigatepublicpreferencesonin-kindsettlements.WefindthatthegeneralpublicprefersthepolicytotargetcommunitiesvulnerabletoEJconcerns.Inachoiceexperimentwitharepresentativesampleofnearly2,500USresidents,weallowedsurveyrespondentstochoosetheirpreferredsettlement:eitheracashpenaltytotheUSTreasuryoranin-kindprojecttargetedtotheareaoftheviolation.Werandomlyvariedthepricetagassociatedwiththein-kindsettlementandwhetherrespondentsweretoldthattheviolationoccurredinanareavulnerabletoEJconcerns.TheextenttowhichrespondentswouldforgocashtotheTreasuryforatargetedin-kindprojectisstriking:over85percentrespondentswerewillingtoforgotwothirdsofthecashpenalty(i.e.,respondentspreferred$100,000inin-kindsettlementtotheafflictedcommunityratherthan$300,000cashtotheTreasury).Moreover,theEJtreatmentresultsinastatisticallysignificantincrease(6percentagepoints)inpreferenceforin-kind,whichisinlinewiththepreviousfinding

1Broadlyspeaking,policiescanindirectlyaddressEJif,byuniformlyliftingenvironmentalquality,disadvan-tagedgroupsobtainlargermarginalbenefits(

Hsiangetal.

,

2019

),orcandirectlyaddressEJbydeliveringmoreenvironmentalgoodstodisadvantagedgroups.LessresearchexistsonpoliciesdireclytacklingEJ,includingtheEPA’sin-kindsettlementpolicy.

4

ofapublicpreferenceforredistributiontoindividualslivingindistressedareas(

Gaubertetal.

,

2020

).

Wethenturntotheimplicationsofin-kindsettlementsforfirmsandfindthatfirmsbenefitintwodifferentanalyses.InarandomizedsurveyofthesamesampleofUSresidents,wefindevidencethatanin-kindsettlementimprovesthepublic’sperceptionofaviolatingfirm.Werandomlyassignedrespondentstoreadadescriptionofahypotheticalsettlement,involvingeitheracashpaymenttotheUSTreasuryoranin-kindprojecttotheafflictedcommunity,andthenaskedrespondentstoexpresstheirperceptionoftheviolatingfirm(e.g.,howgoodofaninvestmentitwouldmakeortheiroverallfeelingtowardit).Surveyrespondentsthatweregiventhein-kindtreatmenthadamuchmorefavorableviewofthecompany,eventhoughitwasguiltyofthesameviolation.Thesefindingssupporttheemergingviewthatcorporatesocialresponsibility(CSR)mightbeanoptimalstrategyforfirms,giventhepreferencesofshareholders,consumers,employees,activists,andregulators(

KitzmuellerandShimshack

,

2012

).

2

Wealsoexaminewhetherinvestorsreactmorepositivelytoin-kindthancashsettlements.WeusedataonUSenvironmentalcasesoccurringbetween1997and2017andmeasurewhethertheannouncementofafirmvolunteeringanin-kindsettlementisassociatedwithadifferentstock-marketresponsethantheannouncementofacashpenalty.

3

Recentpapershaveexaminedthestock-marketimpactofenvironmentalenforcementactions(

Karpoffetal.

,

2005

;

Armouretal.

,

2019

;

Bradyetal.

,

2019

),butsofarnoattentionhasbeenpaidtothedifferencebetweencashandin-kindsettlements.

4

Thestock-marketfindingsareinlinewiththesurveyfindings.Despitenosignificantdifferenceinabnormalstock-marketreturnsbysettlementtypebeforethesettlementannouncementandthenanasymmetricstock-marketresponseaftertheannouncement:cash

2Althoughtheyarepartofanenforcementaction,in-kindprojectsresemblecorporatesocialresponsibility(CSR)inthattheycommitfirmstoprovideenvironmentalbenefitsaboveandbeyondlegalrequirementsandmightthereforebepartofafirmstrategytorespondtostakeholderpressure.

3Investorsmayviewsettlementtypesdifferentlyforvariousreasons:theultimatecostassociatedwithin-kindsettlementsisuncertain,implyingpotentialsavingsontheprojectcost;theprojectmightinvolveinvestmentsthatarebeneficialforthefirm;andthein-kindsettlementmightimprovethefirm’sreputation,assuggestedbythesurvey.

4Forexample,

EarnhartandSegerson

(

2012

)and

Bradyetal.

(

2019

)examinetheimplicationsofsanctionsonfirmsforenvironmentalviolations,andin-kindprojectsaresummedwithotherpenaltyamounts.

5

settlementsareassociatedwithanegativestock-marketreaction,whereasin-kindsettlementsareassociatedwithapositivereaction.Weconsiderseveralcase-anddefendant-levelcharacteristicsbysettlementtypeandfindnoevidenceofothersignificantdifferences.Wealsorestricttheanalysistoin-kindsettlementsonlyandstudytheresponsetoin-kindamount:thelargerthesettlement,themorepositivethestock-marketreaction.Thestockmarketanalysisandsurveyexperimentssuggestthat,eventhoughin-kindsettlementsariseoutofwrongdoingasmuchascashsettlements,theyproviderelativelymorebenefitstoviolatingfirms.

Long-rundynamicsmaketheenvironmentalimplicationsofin-kindsettlementsambiguous.Thebenefitsaccruedtoviolatingfirmscouldresultindiminisheddeterrence,negativelyimpactingenvironmentalquality.Alternatively,in-kindsettlementsthemselvescouldimproveenvironmentalqualityandincreasedeterrence.First,firmgoodwillcouldincentivizefirmstoundertakemoreenvironmentalstewardship.Second,localcommunitiesmightbecomemorelikelytomonitorandreportviolations.Andthird,anadditionalbenefittothefirmarisingfromtheUSin-kindsettlementsisthattheyallowforpurchasingequipmentforenvironmentalimprovements.Newequipmentcanhelpthefirmremaininorevenexceedregulatorycompliance.Ourinvestigationintotheimplicationsofsettlementtypeonfutureenvironmentalqualityfindsthatonlycashsettlementsmightleadtolowerlocalpollution,althoughtheeffectislimitedtotheshortrun,buttheimprecisionoftheestimatesforin-kindsettlementsultimatelypreventsusfromdrawingdefiniteconclusions.

Therestofthepaperisstructuredasfollows.Section

1

describesenvironmentalenforcementactionsandtheresultingsettlements.Section

2

providesanoutlineoftrade-offstoconsiderwhenweighingin-kindversuscashsettlements.Section

4

presentsthecurrentallocationofin-kindsettlementsacrosscommunities.InSection

5

,wepresentresultsfromanonlinesurveyofthepublic’spreferences.InSection

6

,weestimatethestock-marketresponsetosettlementannouncements.Section

7

presentsresultsonenvironmentalquality.Section

8

concludes.

6

1InstitutionalBackground

Whenanindividual,firm,orlocalgovernmentisfoundviolatingUSfederalenvironmentallaws,theEPAmayinitiateenforcementactionsagainsttheviolator.EnforcementcanstartwithaNoticeofViolation,intendedtoencouragetheviolatortoreturntocomplianceasquicklyaspossible.TheEPAmaythenstartaciviladministrativeactionoraciviljudicialaction;thesearesimilar,withthemaindifferencebeingthatjudicialactionsarebroughtonbehalfoftheEPAtocourtsbytheDepartmentofJustice(DOJ)or,forthestate-ledcases,tostatecourtsbystateattorneysgeneral.

5

TheEPAdecidesonanactiondependingonfactorssuchas,howlongitmighttaketogetintocomplianceorhowmuchpenaltywillbesought.Thepenaltyisdeterminedaccordingtovariousfactors,suchasthemagnitudeofenvironmentalharm(“gravity”),thefirm’seconomicgainfromviolating,theviolationhistory,andtheabilitytopay.Apartfromthepenalty,settlementsalsooftenrecordthecostsrequiredtogetbackintocompliance(“complianceactioncosts”).

Duringthesettlementnegotiation,theEPAallowsfirmstoproposein-kindSupplementalEnvironmentalProjects(SEPs),thatcanbeusedtomitigatetheassessedcashpenalty.SEPsarevoluntaryandnegotiatedsolelybetweentheEPAandtheviolator;EPAencouragestheviolatortoreachouttothecommunityaffectedforideas,butnoformalrequirementforcommunityengagementexists.

6

TheEPAhastotaldiscretiononwhethertoacceptorrejectaproposedproject.Theguidelines

onSEPscautionconsiderationwhenmitigatingpenalties:“Penaltieshelpmaintainanational

5Criminalcases,citizensuits,andprivate-partysuitsarethreeothercategoriesofenforcementactionsbutareexcludedfromourstudybecausetheyarenotincludedinourdatasetandalsodonotallowtheoptionofin-kindprojects.CitizensuitsarealsorareforstatutesotherthantheCleanWaterAct(

LangpapandShimshack

,

2010

).Casesaredeemedcriminalwhentheyresultinsignificantenvironmentalharmandincludeproofofdeliberatemisconduct.Privatecitizenscanbringsuitstoenforcefederallaws,whichcanresultinsettlementsofcivilpenalties,attorney’sfees,andcoststotheplaintiffs.Private-partysuitsaredesignedtorecovermonetarycompensationforharmtotheplaintiff.

6TheEPAnotesthatmissingcommunityinvolvementinthedevelopmentofSupplementalEnvironmentalProjects(SEPs)couldarisefromanumberofreasons,includingdisagreementwithinthecommunityandtheunwillingnessofdefendants(

EnvironmentalProtectionAgency

,

2003a

).Anotherexplanationcouldbethatcom-munitiesmightnotbewellpositionedtoparticipateinthelegalandtechnicaldiscussionsthattypicallyprecedeestablishingin-kindprojects(wethankananonymousreviewerforraisingthispoint).

7

levelplayingfieldbyensuringthatviolatorsdonotobtainanunfaireconomicadvantageovertheircompetitorswhomadethenecessaryexpenditurestocomplyontime.Thus,anymitigationofpenaltiesmustbecarefullyconsidered”(

EnvironmentalProtectionAgency

,

2015

).Theentirepenaltycannotbemitigated,andonedollarspentinaSEPcanoffsetatmost80centsofthepenalty.

7

GuidelinesalsostatethatSEPsareonlyallowediftheyhavesufficient“nexus”withtheviolation,whichisdefinedbymediumandgeography.Theprojectmustrelatetotheviolationbyreducingfutureviolations,adverseimpacts,orriskstopublichealthortheenvironmentaffectedbytheviolation.Theprojectshouldalso“generallybeintheareawithina50-mileradiusofthesiteonwhichtheviolationsoccurred”(

EnvironmentalProtectionAgency

,

2015

).SEPsshouldalsonotbeanactionthattheviolatorislegallyrequiredtotake,andtheyshouldreachenvironmentalbenefits“beyondcompliance.”TheEPAthenevaluateseachproposedprojectbasedonsixcriticalfactors:theextenttowhichitbenefitspublichealthandtheenvironment,addressesEJconcerns,getsinputfromtheaffectedcommunity,furthersinnovationthatisenvironmentallybeneficial,reducespollutionacrossmorethanonemedium,andpreventspollution.ExamplesofSEPscanbefoundinAppendixSection

A1

,Tables

A1

and

A2

.

SEPsarerare,occurringin4.1percentofthecases.WedonothavearecordofwhetheraSEPwasproposedandturneddown.Manyofthecasessettlewithoutanypenalty,andmanyhaveonlysmallcashpenalties,soin-kindprojectsofacomparableamountareunlikelytointerestallthepartiesinvolved.AdditionalimpedimentsofSEPscouldarisefromensuringalllegalguidelinesarefollowed.Requirementsincludethattheprojectisnototherwiselegallyrequired

andhassufficientnexuswiththeviolation;thatitdoesnotinvolvecompaniesthatarereceiving

7Inthelegalinterpretationofthepolicy,SEPsarenotpenalties;theEPAclearlystatesthat“SEPsarenotpenalties,noraretheyacceptedinlieuofapenalty”(

EnvironmentalProtectionAgency

,

2015

).Thisisnecessarytoensurethepolicydoesnotviolatefederallaw.TheUSMiscellaneousReceiptsAct(33U.S.C.?3302(b))requirescashpenaltiestobepaidtotheUSTreasury.ItistheEPA’sviewthatSEPsarenotadiversionofpenaltyfunds(

/enforcement/supplemental-environmental-projects-seps

).Nevertheless,SEPsaredirectlyintertwinedwithpenalties:theEPAacknowledgesthat“aprimaryincentiveforadefendanttoproposeaSEPisthepotentialmitigationofitscivilpenalty”(

EnvironmentalProtectionAgency

,

2015

).Thus,weproceedwithaskingaboutthetrade-offsbetweenacash-onlysettlementandasettlementthatincludesaSEPbutrecognizethatSEPsarenotpenaltiesbutmitigatingfactorsinpenaltyassessment.

8

federalloans,contracts,andgrants;andthatfirmscannotjustsimplywriteadonationcheck(

EnvironmentalProtectionAgency

,

1998

).Ingeneral,theinfrequencyofSEPssuggestsadditionalcostsassociatedwithincludingthem(seeSection

2

).Perguidelines,theEPAcannotdemand,control,ormanageSEPs,buttheEPAhasmadeofficialattemptstoincreasethetheiruse,byshorteningandsimplifyingthepolicyandprovidinginformationoncompletedandnewprojects(

EnvironmentalProtectionAgency

,

2003b

).WeinterprettheEPAdocumentsthatpointtotheEPAactivelyseekingandencouragingSEPstoimplythattheirinfrequencyislikelydrivenbydisinterestfromfirmsandpersistentadministrativeandlegalimpediments.

2ConceptualFrameworkWeighingIn-kindVersusCashSettlements

Anin-kindsettlementcomeswithbothcostsandbenefits.Wegroupthesecostsandbenefitsintofourdifferentcategories:

Communityandredistributivebenefits.Acentralquestioninwelfareeconomicsishowtoallo-categoodstothemostdeservingparty.Embeddedinthisquestionarechoicesonredistribution,ethics,andpaternalism.

AsocialplannermightprefertargetingofSEPsonredistributivegroundsfortworeasons.First,asformanyothergoods,thevalueofaSEPdependsonthemarginalutilityoftheenviron-mentalimprovements,whichvarybycommunitydependingontheexistinglevelsofenvironmentalquality,healthconditions,orwillingnesstopayfordefensiveexpenditures.DiminishingutilityfromimprovementsinenvironmentalqualityprovidesthefirstreasontotargetSEPsincommuni-tieswithdisproportionateenvironmentalburdens.Second,simplesocialwelfareweightsinasocialwelfarefunctionthatputsmoreweightondisadvantagedcommunitieswouldprovideadditionalimpetustotargetSEPs.Forexample,aRawlsiansocialwelfarefunction,aimingforequalityofopportunity,wouldputallweightonthemostdisadvantaged.Socialwelfareweightscould

9

alsofavorharmedcommunitiesbasedontheethicaljustificationofcompensatingthosethatwerewronged.

Oncearedistributivechoiceismade,anin-kindsettlementmightbepreferredsimplybybeingbetterabletodeliverbenefitstothetargetedcommunity.

8

ThisisparticularlysalientinthecontextofUSfederallaw,inwhichacashp