Row 7 equals row 1 divided by 30 times row 5, since it assumes water quality improvements accrue for 30years. These estimates are even less positive than the estimates for housing. Our finding that benefits last about as long as engineering estimates suggest (30years) and for only the expected pollutants also are not exactly what this story would predict. Fourth, this analysis abstracts from general equilibrium changes. Notes. Regressions with linear trend and trend break specifications underscore these findings, subject to the caveats mentioned earlier about the linear approximations and the long post period. One involves declining returns to abatement of pollution from point sources. At the same time, much oxygen-demanding pollution comes from agriculture and other nonpoint sources, and those sources have remained largely unregulated. Its mission is to improve environmental, energy, and natural resource decisions through impartial economic research and policy engagement. The estimates in TableIV are generally consistent with near complete pass-through, that is, little or no crowding out or in beyond the required municipal capital copayment. These graphs also suggest that existing evaluations of the Clean Water Act, which typically consist of national trend reports based on data from after 1972, may reflect forces other than the Clean Water Act. This article is published and distributed under the terms of the Oxford University Press, Standard Journals Publication Model (. Online Appendix E.3 discusses interpretations of our housing estimates under alternative pass-through numbers. Dependent variable is municipal sewerage capital investment. The top decile of counties includes ratios between 0.31 and 0.41. The inverse propensity score reweighted estimates are designed to reflect the entire population of U.S. cities. Finally, we interpret our pass-through estimates cautiously because they reflect only 198 cities, do not use upstream waters as a comparison group, and reflect pass-through of marginal changes in investment, rather than the entire Clean Water Act. Benefits and Costs of the Clean Air Act Section 812 of the 1990 Amendments (Public Law 101-549) requires EPA conduct scientifically reviewed studies of the impact of the Clean Air Act on the public health, economy and environment of the United States. Online Appendix B.3 describes the rule we use to choose indicators for this list; it mainly reflects the pollutants used in the USEPAs (1974) first major water pollution report after the Clean Water Act. "Clean Water Act" became the Act's common name with amendments in 1972. The 1972 to 2001 change equals the fitted value Year*29 + Year*1[Year>=1972]*29. Panel B shows no evidence that homes within 25 miles of the downstream river increase after a treatment plant receives a grant. One possible channel is that wages change to reflect the improvement in amenities (Roback 1982). The ultimate entity responsible for local capital costs and operation and maintenance costs is ambiguous because local governments may receive other payments from state or federal governments to help cover these costs. Municipal spending data from Annual Survey of Governments and Census of Governments. The 30-year duration of these benefits is also consistent with, though on the lower end of, engineering predictions. Municipal and grant costs are cumulative since 1970. We now discuss six reasons the ratios of measured benefits to costs from the previous subsection may provide a lower bound on the true benefit/cost ratio. Second, measuring cost-effectiveness is insufficient to reach conclusions about social welfare; Section VII discusses peoples value for these changes. Grant project costs include federal grant amount and required local capital expenditure. The Clean Water Act targets point sources like industry, municipal and state governments, and agriculture. Log specifications would implicitly assume that the percentage change in a rivers pollution due to a grant is the same for a river with a high background concentration, which is unlikely. \end{equation}, Political Internalization of Economic Externalities and Environmental Policy, What Are Cities Worth? Adler Robert W., Landman Jessica C., Cameron Diane M.. Angrist Joshua D., Pischke Jrn-Steffen, Artell Janne, Ahtiainen Heini, Pouta Eija, , Boscoe Francis P., Henry Kevin A., Zdeb Michael S., , Carson Richard T., Mitchell Robert Cameron, , Currie Janet, Zivin Joshua Graff, Meckel Katherine, Neidell Matthew, Schlenker Wolfram, , Deschenes Olivier, Greenstone Michael, Shapiro Joseph S., , Faulkner H., Green A., Pellaumail K., Weaver T., , Gianessi Leonard P., Peskin Henry M., , Jeon Yongsik, Herriges Joseph A., Kling Catherine L., Downing John, , Kahn Matthew E., Li Pei, Zhao Kaxuan, , Keiser David A., Kling Catherine L., Shapiro Joseph S., , Kling Catherine L., Phaneuf Daniel J., Zhao Jinhua, , Leggett Christopher G., Bockstael Nancy E., , Lipscomb Molly, Mobarak Ahmed Mushfiq, , Muehlenbachs Lucija, Spiller Elisheba, Timmins Christopher, , Muller Nicholas Z., Mendelsohn Robert, , Muller Nicholas Z., Mendelsohn Robert, Nordhaus William, , Olmstead Sheila M., Muehlenbachs Lucija A., Shih Jhih-Shyang, Chu Ziyan, Krupnick Alan J., , Peiser Richard B., Smith Lawrence B., , Poor P. Joan, Boyle Kevin J., Taylor Laura O., Bouchard Roy, , Smith Richard A., Alexander Richard B., Wolman M. Gordon, , Smith V. Kerry, Wolloh Carlos Valcarcel, , Steinwender Astrid, Gundacker Caludia, Wittmann Karl J., , Wu Junjie, Adams Richard M., Kling Catherine L., Tanaka Katsuya, , Oxford University Press is a department of the University of Oxford. Because no reference category is required in this kind of event study setting, where one observation can receive multiple treatments, for ease of interpretation, we recenter the graph line so the coefficient for the year before treatment ( = 1) equals 0. Any opinions and conclusions expressed herein are those of the authors and do not necessarily represent the views of the U.S. Census Bureau. We did not use these data because they focus on 1990 and later, mainly measure pesticides, and have a small sample. Secure .gov websites use HTTPS This analysis, however, is subject to serious concerns about use and nonuse estimates in the underlying studies. How the Clean Water Act Protects Your Rivers - American Rivers Clean Water Act Grants and Water Pollution, Steinwender, Gundacker, and Wittmann 2008, Muehlenbachs, Spiller, and Timmins (2015), U.S. Government Accountability Office 1994, https://ofmpub.epa.gov/waters10/attains_nation_cy.control, https://academic.oup.com/journals/pages/open_access/funder_policies/chorus/standard_publication_model, Receive exclusive offers and updates from Oxford Academic, 6. In the presence of such rents, this analysis could be interpreted as a cost-effectiveness analysis from the governments perspective. The positives of the Lacey Act it is one of . The Clean Water Act's grantmaking system creates higher costs than market-based regulations, argue Keiser and Shapiro. Effects of Clean Water Act Grants on Water Pollution: Event Study Graphs. They conclude that nothing has changed since 1975. Market-based instruments are believed to be more cost-effective than alternatives. Iowa State and Center for Agricultural Research and Development. These confidence regions do not reject the hypothesis that the ratio of the change in home values to the grants costs is zero but do reject the hypothesis that the change in home values equals the grants costs. As mentioned in the introduction, other recent analyses estimate benefits of the Clean Water Act that are smaller than its costs, though these other estimates note that they may also provide a lower bound on benefits. We also estimate linear water pollution trends using the following equation: \begin{equation} This predictable spatial variation in the net benefits of water quality variation suggests that allowing the stringency of regulation to vary over space may give it greater net benefits (Muller and Mendelsohn 2009; Fowlie and Muller forthcoming). This implies that coefficients in the graph can be interpreted as the pollution level in a given year, relative to the pollution level in the period before the treatment plant received a grant. Estimates come from regression specifications corresponding to TableV, columns (3) and (4). We thank the editor, Larry Katz, along with four referees, Joe Altonji, Josh Angrist, David Autor, Richard Carson, Lucas Davis, Esther Duflo, Eli Fenichel, Michael Greenstone, Catherine Kling, Arik Levinson, Matt Kotchen, Amanda Kowalski, Rose Kwok, Drew Laughland, Neal Mahone, Enrico Moretti, Bill Nordhaus, Sheila Olmstead, Jordan Peccia, Nick Ryan, Daniel Sheehan, Kerry Smith, Richard Smith, Rich Sweeney, Reed Walker, and participants in many seminars for excellent comments; Randy Becker, Olivier Deschenes, Michael Greenstone, and Jon Harcum for sharing data; Elyse Adamic, Todd Campbell, Adrian Fernandez, Ryan Manucha, Xianjun Qiu, Patrick Reed, Vivek Sampathkumar, Daisy Sun, Trevor Williams, and Katherine Wong for excellent research assistance; and Bob Bastian and Andy Stoddard for explaining details of the Clean Water Act. These comparisons also highlight features of the Clean Water Act that are not widely recognized and could lead it to have lower net benefits than some other environmental regulation. Row 5 is calculated by multiplying each grant by the parameter estimate in Online Appendix TableVI, row 13, column (2), and applying the result to all waters within 25 miles downstream of the treatment plant. The annual cost to make a river-mile fishable ranges from |${\$}$|1.5 to |${\$}$|1.9 million.19, Cost-Effectiveness of Clean Water Act Grants (|${\$}$|2014 MN). First is the choice of policy instrument. Column (2) adds controls for dwelling characteristics, and for baseline covariates interacted with year fixed effects. The gradual effect of the grants is unsurprising since, as mentioned earlier, the EPA estimates that it took 2 to 10 years after a grant was received for construction to finish. A city may spend a grant in years after it is received, so real pass-through may be lower than nominal pass-through. Column (2) includes plants in the continental United States with latitude and longitude data. Column (1) shows estimates for homes within a quarter mile of downstream waters. The Roles of Environmental Regulation, Productivity, and Trade. It is possible that areas with more pollution data may be of greater interest; for example, FigureI, Panel C shows more monitoring sites in more populated areas. Part I: State Pollution Control Programs, The Role of Water Quality Perceptions in Modelling Lake Recreation Demand, The International Handbook on Non-Market Environmental Valuation, The Displacement of Local Spending for Pollution Control by Federal Construction Grants, American Economic Review Papers and Proceedings, Water Pollution Progress at Borders: The Role of Changes in Chinas Political Promotion Incentives, American Economic Journal: Economic Policy, The Missing Benefits of Clean Water and the Role of Mismeasured Pollution Data, The Low but Uncertain Measured Benefits of US Water Quality Policy, Proceedings of the National Academy of Sciences, Replication Data for Consequences of the Clean Water Act and the Demand for Water Quality, Evaluating Public Programs with Close Substitutes: The Case of Head Start. Official websites use .gov Online Appendix FigureV shows the effect of a grant by distance downstream from a treatment plant; few data are available to estimate effects separately for each five-mile bin along the river, and estimates are correspondingly less precise. The curve 1 describes the bid function of one type of consumer. Primary focus: Establish cooperation between feds and states. Fifth, the 25-mile radius is only designed to capture 95% of recreational trips. Each of the four pollutants which are part of these fishable and swimmable definitions declined rapidly during this period. Online Appendix TableVII investigates heterogeneity in measured benefits and costs; Online Appendix E.3 discusses the results. This explanation is less relevant for the slowing trends in continuous variables like BOD, fecal coliforms, or TSS. Our estimates are consistent with no crowding out for an individual grant, but the existence of the Clean Water Act may decrease aggregate municipal investment in wastewater treatment. Second, due to nonuse or existence values, a person may value a clean river even if they never visit or live near that river. That study does not separately identify the effect of the pollution tax from the effect of the abatement subsidy. Asterisks denote p-value < .10 (*), < .05 (**), or < .01 (***). Cumulative grants include grants in all previous years, not only census years. In the years after a grant, downstream waters have 12% lower dissolved oxygen deficits, and become 12% less likely to violate fishing standards. The product is a tablet that turns any type of substance into clean substance. pH increased by 0.007pH units a year, meaning that waters became more basic (less acidic). A fourth question involves health. Fishable readings have BOD below 2.4mg/L, dissolved oxygen above 64% saturation (equivalently, dissolved oxygen deficits below 36%), fecal coliforms below 1,000 MPN/100mL, and TSS below 50mg/L. Others relate drinking water quality directly to health (Currie etal. River miles * pct. If approved, it will protect clean drinking water, upgrade water infrastructure, preserve open space and family farms, fight climate change, and keep communities safe from extreme weather,. CBO (1985) dictates this time period because it provides the national total state and local spending data underlying this graph. Season controls are a cubic polynomial in day of year. \end{equation}, \begin{equation} As in most event study analyses, only a subset of event study indicators are observed for all grants. The Office of Water (OW) ensures drinking water is safe, and restores and maintains oceans, watersheds, and their aquatic ecosystems to protect human health, support economic and recreational activities, and provide healthy habitat for fish, plants, and wildlife. The 1.4 ratio and the 34-mile calculation from the previous paragraph both use survey weights. Data on industrial water pollution in the 1960s is less detailed, though manufacturing water intake (which is highly correlated with pollution emissions) was flat between 1964 and 1973 due to increasing internal recycling of water (Becker 2016). Estimates without the basin year controls are more positive but also more sensitive to specification, which is one indication that the specification of equation (6) provides sharper identification. Row 4 is calculated following the method described in Online Appendix B.4. Parts of the Clean Air Act use cap-and-trade systems, but nearly none of the Clean Water Act does. The Clean Water Act addressed a classic externality. Moreover, the share of industrial water discharge that was treated by some abatement technology grew substantially in the 1960s (U.S. Census Bureau 1971). First "water pollution control" legislation. Other water pollution research generally specifies BOD and TSS in levels; practices vary for fecal coliforms. The Clean Air Act is a United States federal law designed to control air pollution on a national level. We find that by most measures, U.S. water pollution has declined since 1972, though some evidence suggests it may have declined at a faster rate before 1972. The Truth About the Safe Drinking Water Act - Off The Grid News Each observation in the data is a pollution reading. Our topic is clean water and sanitation. The Clean Water Act fight polluted water by adopting a strategy that targets point sources of water pollution. The point estimates imply that the benefits of the Clean Water Acts municipal grants exceed their costs if these unmeasured components of willingness to pay are three or more times the components of willingness to pay that we measure. The last 5% of trips might account for disproportionate surplus because they represent people willing to travel great distances for recreation. Clean Water Act Cons. The cost-effectiveness estimates for fishable regressions are based on Online Appendix TableVI, row 13. Decent Essays. The Author(s) 2018. An official website of the United States government. Sample size in all regressions is 6,336. These estimates are within a standard deviation of one, so fail to reject the hypothesis that the municipal wastewater investment exactly equals the cost listed in the grant project data.20. We also report event study graphs of outcomes relative to the year when a facility receives a grant: \begin{align} These pass-through estimates also speak to the broader flypaper literature in public finance, so named to reflect its finding that federal government spending sticks where it hits. Researchers have estimated the pass-through of federal grants to local expenditure in education, social assistance, and other public services. Online Appendix F discusses other reasons we believe have weaker support. Flint, Michigan, has recently had high lead levels in drinking water due to switching its water source from the Detroit River to the Flint River. Panel A shows modest evidence that in the years after a plant receives a grant, the values of homes within 0.25 mile of the downstream river increase. The Clean Water Act and Water Pollution, VI. Why farmers and ranchers think the EPA Clean Water Rule goes too far - PBS Home prices and rents are deflated to 2014 dollars by the Bureau of Labor Statistics consumer price index for urban consumers. All You Need to Know About The Clean Water Act & Its Amendments The Pros And Cons Of Clean Water - Internet Public Library The Clean Water Act has protected our health for more than 40 years -- and helped our nation clean up hundreds of thousands of miles of polluted waterways. This early version of the CWA left sanitation planning up to the surgeon general, and allowed the Federal Works Administration to help local and state governments with prevention and cleanup efforts. Cropper and Oates (1992) describe the Clean Water Act as the only major environmental regulation of the 1970s and 1980s that does not have health as its primary goal. Effects of Clean Water Act Grants on Log Mean Home Values: Event Study Graphs. Paperless Cons. Finally, we note one similarity between air and water pollution that may be relevant to policy design. Market-Based Emissions Regulation When Damages Vary Across Sources: What Are the Gains from Differentiation? We deflate operating and maintenance costs and rents at a rate of 7.85% (Peiser and Smith 1985).23, Column (1) of TableVI includes only owned homes within a 1-mile radius of the downstream river segments; column (2) includes homes within a 25-mile radius; and column (3) adds rental units. Cost-effective regulation equates marginal abatement costs across sources, which requires regulating all sources. Water is a critical source that is utilized by most living things on Earth to support it ways of live. Panel C estimates the effect of grants on log housing units and Panel D on the log of the total value of the housing stock. These estimates divide treatment plants into 10 deciles of the number of housing units in 2000 within 25 miles of downstream river segments. Point sources are discrete conveyances such as pipes or man-made ditches. Consequences of the Clean Water Act and the Demand for Water Quality Optimizing consumers should equate the marginal disutility of pollution to the marginal cost of protection from pollution. Overall, this evidence does not suggest dramatic heterogeneity in cost-effectiveness. It remains one of our nation's most vital safeguards for the health and safety of our communities and our environment. Electricity-generating units and other sources do contribute to thermal pollution in rivers, but increasing temperature is an outlier from decreasing trends in most other water pollutants. But municipal investments that occurred were closely connected to grants, and point estimates imply that the grant costs in our data accurately represent the actual change in spending. Standard errors are clustered by watershed. When we fit the change in home values, we do so both for only the balanced panel of tract-years reporting home values, and for all tract-years. In years before a grant, the coefficients are statistically indistinguishable from zero, have modest magnitude, and have no clear trend (FigureIII). These regressions are described in equation (4) from the text. In part for this reason, we focus on specifications including basin year fixed effects and the interaction of baseline characteristics with year fixed effects. The main regression sample includes only a balanced panel of tracts that appear in all four censuses between 1970 and 2000; imputing values for missing homes hardly changes the ratio in column (4). In the presence of such general equilibrium changes, our estimates could be interpreted as a lower bound on willingness to pay (Banzhaf 2015). 3 Pages. Shapiro thanks fellowships from the EPA, MIT-BP, Martin Family Fellows, the Schultz Fund, the Yale Program on Applied Policy, and NSF Grant SES-1530494 for generous support. We emphasize a few caveats in interpreting TableIV. Effects of Clean Water Act Grants on Housing Demand. The federal government paid 75% of the capital cost for most construction projects awarded through September 1984, and 55% thereafter; local governments paid the rest of the capital costs. 33 U.S.C. When Subsidies for Pollution Abatement Increase Total Emissions, Water Quality and Economics: Willingness to Pay, Efficiency, Cost-effectiveness, and New Research Frontiers, Handbook on the Economics of Natural Resources, Evidence of the Effects of Water Quality on Residential Land Prices, Decentralization and Pollution Spillovers: Evidence from the Re-drawing of County Borders in Brazil, Taxation with Representation: Intergovernmental Grants in a Plebiscite Democracy, An Economic Analysis of Clean Water Act Issues, Contingent Valuation of Environmental Goods, A Symphonic Approach to Water Management: The Quest for New Models of Watershed Governance, Ex Post Evaluation of an Earmarked Tax on Air Pollution, Microeconometric Strategies for Dealing with Unobservables and Endogenous Variables in Recreation Demand Models, The Housing Market Impacts of Shale Gas Development, Efficient Pollution Regulation: Getting the Prices Right, Environmental Accounting for Pollution in the United States Economy, Handling Unobserved Site Characteristics in Random Utility Models of Recreational Demand, Presidential Veto Message: Nixon Vetoes Water Pollution Act, Review of Environmental Economics & Policy, Shale Gas Development Impacts on Surface Water Quality in Pennsylvania, Homeownership Returns, Tenure Choice and Inflation, Objective versus Subjective Measures of Water Clarity in Hedonic Property Value Models, Building a National Water Quality Monitoring Program, Why Is Pollution from U.S. Manufacturing Declining? However, it leaves it up to EPA. Asterisks denote p-value < .10 (*), < .05 (**), or < .01 (***). Contact: joseph.shapiro@berkeley.edu, UC Berkeley, Berkeley, CA 94720, (510) 642-3345, Fax (510) 643-8911. The only econometric analysis we know of such policies tests how the French policy of jointly taxing industrial air pollution and subsidizing abatement technologies affected emissions, using data from 226 plants (Millock and Nauges 2006). Summary of the Clean Water Act | US EPA Online Appendix E.2 discusses how cost-effectiveness numbers change with alternative estimates of crowding out.22. Panel A reports estimates of how grants affect log mean home values. Volume II, Clean Water Construction Grants Program News, Handbook of Procedures: Construction Grants Program for Municipal Wastewater Treatment Works, The Benefits and Costs of the Clean Air Act, 1970 to 1990, A Benefits Assessment of Water Pollution Control Programs Since 1972: Part 1, The Benefits of Point Source Controls for Conventional Pollutants in Rivers and Streams: Final Report, A Retrospective Assessment of the Costs of the Clean Water Act: 1972 to 1997: Final Report, Progress in Water Quality: An Evaluation of the National Investment in Municipal Wastewater Treatment, The National Costs to Implement TMDLs (Draft Report): Support Document 2, The Clean Water and Drinking Water Infrastructure Gap Analysis, ATTAINS, National Summary of State Information, Water Pollution: Information on the Use of Alternative Wastewater Treatment Systems, From Microlevel Decisions to Landscape Changes: An Assessment of Agricultural Conservation Policies, American Journal of Agricultural Economics. Letting States Do the Dirty Work: State Responsibility for Federal Environmental Regulation, Transboundary Spillovers and Decentralization of Environmental Policies, Water-Quality Trends in the Nations Rivers. In Panel B, the year variables are recentered around 1972. N1 - Macroeconomics and Monetary Economics; Industrial Structure; Growth; N3 - Labor and Consumers, Demography, Education, Health, Welfare, Income, Wealth, Religion, and, N4 - Government, War, Law, International Relations, and, N5 - Agriculture, Natural Resources, Environment, and Extractive, N7 - Transport, Trade, Energy, Technology, and Other, O - Economic Development, Innovation, Technological Change, and, O3 - Innovation; Research and Development; Technological Change; Intellectual Property, Q - Agricultural and Natural Resource Economics; Environmental and Ecological, R - Urban, Rural, Regional, Real Estate, and Transportation, R3 - Real Estate Markets, Spatial Production Analysis, and Firm, Z1 - Cultural Economics; Economic Sociology; Economic, II. For instance, the Clean Water Act's grantmaking program has cost the U.S. government about $650 billion total, or about $1.5 million per year to make one mile of river fishable. Panels A and B reflect the classic hedonic model, with fixed housing stock. Column (1) includes only plants analyzed in column (2) of TableII. Finally, we average this ratio across plants in each county. The Clean Air Act covers essentially all major polluting sectors. Data include years 19622001. The curve 1 describes the offer function of a firm, and 2 of another firm. But Supreme Court decisions in 2001 and 2006 threw protections into question for 60 percent of our nation's streams and millions of acres of wetlands. All values in billions (|${\$}$|2014). One such channel involves substitutioncleaning up part of a river in an area with many dirty rivers might have different value than cleaning up a river in an area with many clean rivers. Choosing Environmental Policy: Comparing Instruments and Outcomes in the United States and Europe, Contingent Valuation: From Dubious to Hopeless, Nor Any Drop to Drink: Public Regulation of Water Quality. We now turn to estimate the cost-effectiveness of these grants. Online Appendix TableIII shows these results and Online Appendix E.1 explains each.
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