Environmental and Resource Economics

, Volume 42, Issue 2, pp 151–168 | Cite as

Which Firms are More Sensitive to Public Disclosure Schemes for Pollution Control? Evidence from Indonesia’s PROPER Program

Article

Abstract

This paper analyzes differences in firms’ responsiveness to PROPER, Indonesia’s public disclosure program for industrial pollution control. The overall effectiveness of this program at achieving emissions reductions and its low regulatory costs have earned it a good reputation around the world. PROPER had no deterrents or incentives other than those that arose indirectly from publicly disclosing information about the environmental performances of firms. We analyzed plant-level data to relate short- and longer-term environmental responses to facility characteristics. The results revealed that foreign-owned firms were consistently more likely to respond to the environmental rating scheme, compared to private domestic firms. This is a clear and important insight with consequences for a number of issues, such as understanding the pollution haven debate. Also, firms located in densely populated regions, particularly in Java, responded more positively to the public disclosure of PROPER ratings. The main observed effect was however given by the initial level of environmental performance of firms. Those firms that had bad environmental performance records felt pressure to improve, but if the initial abatement steps had already been taken, the incentives to improve further appeared to diminish.

Keywords

Environmental policy Pollution control Public disclosure Developing country Asia Indonesia 

Abbreviations

PROPER

Indonesia’s Program for Pollution Control Evaluation and Rating

BAPEDAL

Indonesia’s National Environmental Regulator

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Copyright information

© Springer Science+Business Media B.V. 2008

Authors and Affiliations

  • Jorge H. García
    • 1
  • Shakeb Afsah
    • 2
  • Thomas Sterner
    • 3
    • 4
  1. 1.Department of EconomicsGöteborg UniversityGoteborgSweden
  2. 2.Performeks LLCBethesda, MarylandUSA
  3. 3.Department of EconomicsGöteborg UniversityGoteborgSweden
  4. 4.Resources for the FutureWashingtonUSA

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