Information disclosure as environmental regulation

Date of Completion

January 2004


Economics, General|Economics, Theory




The widespread acceptance of the government's role in providing environmental information is based on a presumption that providing this information will lead to an improvement in environmental quality. While some empirical studies and anecdotal evidence have linked information disclosure with improved environmental performance, there have been few theoretical analyses examining this presumption. There has also not been a clear distinction between the impacts of disclosure on environmental performance per unit of output vs. its impact on aggregate environmental quality. The purpose of this dissertation is to address these issues. The objective is to examine the role of information disclosure as a policy tool to curb environmental damage where consumers care for environment. The research presented here enriches the growing literature on information disclosure as regulatory policy by bringing in consumers in the above pool of stakeholders. Drawing on the literature on vertical product differentiation yields an innovative methodology with applications in environmental and regulatory economics. Our findings suggest that government information disclosure programs not only affect the products' environmental features but also consumers' allocation in the market. Together, these two effects may cause pollution to increase even for increasing number of informed consumers. The research presented here also expands the growing intersection between environmental economics and public economics by analyzing the effect of a Performance Management Program on cleaning up of the Charles River. A point is being made on the usefulness of informal policies like EMS and information disclosure in regulating non point sources, when traditional regulatory policies seem ineffective. ^