In 1998 the EPA promulgated the first integrated, multi-media regulation – known as the “Cluster Rule” (CR) – to protect human health by decreasing toxic releases by pulp and paper mills into both the air and water.  By combining air and water regulations the EPA hoped to diminish the overall regulatory burden on the affected plants.  The air toxic regulations in the CR required substantial reductions in hazardous air pollutants, sulfur, volatile organic compounds and particulate matter. The water regulations in the CR required virtual elimination of discharges of dioxin, furan, and chloroform. EPA also predicted significant reductions in other air and water pollutants due to CR compliance efforts.

We use plant-level data from both EPA and the Census Bureau for 1992-2008 to estimate the CR’s effectiveness in reducing emissions of both toxic and conventional pollutants.  The Census Bureau’s Longitudinal Business Database provides information on outputs, inputs, and investment spending.  The EPA’s Toxic Release Inventory database provides annual information on the amount and type of releases (both air and water) of a wide range of toxic substances, including some addressed by the Cluster Rule.  The Permit Compliance System provides data on water pollutant discharges, while the National Emissions Inventory provides data on air pollution emissions.  Finally, the Integrated Data for Enforcement Analysis database provides information on regulatory enforcement activity and compliance status of the facilities.

Under the final version of the CR, fewer than half of all pulp and paper mills were subject to the new air toxic standards, which came into effect in April 2001.  Of those covered by the air standards, about two-thirds also needed to comply with the water standards, with compliance dates varying from 1998 to 2002, depending on when their water pollution discharge permit was renewed.  Thus we have a set of regulations affecting multiple pollution media, with different stringency levels across plants, giving us multiple dimensions along which to test the impact of the Cluster Rule.

Our primary model compares changes in performance at covered and uncovered plants before and after the CR was implemented.  We consider both the toxic pollutants specifically covered by the CR as well as other conventional pollutants which were expected to show reductions.  In addition to the effective dates of CR coverage for each plant and pollutant, our explanatory variables include plant characteristics, measures of the enforcement activity directed at the plants, and overall state regulatory stringency.  We test whether reductions in different pollutants are correlated, suggesting the “joint” emission reductions that were a goal of the CR. We also examine the timing of plants’ responses to regulation, using investment spending to identify when plants made major changes in their production process.  Our results will help identify whether a single broad regulatory initiative can be in improving the performance of regulated plants across multiple dimensions.