Since the 1980s, President Ronald Reagan’s “Environmental Federalism” has increased state and private sector involvement in environmental policy.  Experimentation with alternative policy instruments that devolved regulation from the federal government to private actors continued into subsequent presidential administrations.  One form of this new governance approach is voluntary environmental programs, in which firms play a key role in pollution abatement and control by engaging in beyond compliance actions without the force of law.  Prior studies have mixed findings on the effectiveness of such voluntary programs for pollution abatement (e.g., Antweiler & Harrison 2007; Morgenstern & Pizer 2007; Gamper-Rabindran 2006; Welch et al. 2000).  Prakash and Potoski (2012) call for more research that systematically examines conditions under which voluntary environmental programs reduce pollution.

This study examines the effectiveness of a bilateral voluntary agreement, one form of voluntary environmental programs, negotiated between the U.S. EPA and the pressure-treated wood industry, the largest industrial user of arsenic.  The agreement, concluded at the end of 2003, delineated the terms of a voluntary phase-out of the use of chromated copper arsenate (CCA).  This is an important study because CCA is an arsenic compound and arsenic is a poisonous chemical that continues to be ranked #1 on the U.S. EPA’s priority list of hazardous substances. Unlike earlier studies, the estimated models show that the CCA voluntary agreement is associated with reductions in aggregate arsenic use not seen since the 1920s. 

The impact of the CCA voluntary agreement on the industrial use of arsenic in the U.S. is rigorously estimated using a unique U.S. Geological Survey dataset spanning all industrial sectors between 1975 and 2009.  Dynamic panel estimators are employed to estimate the impact models and uniquely, impulse response functions and structural break analysis are used in the sensitivity analyses.  Finally, unlike prior research in this area, systematic surveys elucidate the compliance-related decision-making processes involving firms, regulators, and NGO activists that led to the bilateral voluntary agreement. 

Key words:  Private regulation, voluntary agreement, voluntary compliance, policy process