Third-party Inspectors and Compliance with Environmental Rules

Facing tight budgets, environmental and other safety agencies increasingly depend on third-party inspectors to confirm that businesses are in compliance with environmental and safety rules. These third-party inspectors are certified by the regulator and hired by the regulated. The advantage of third-party inspectors is that they allow budget-constrained regulators, who might only be able to inspect a small proportion of regulated entities, to inspect all regulated entities. The disadvantage of such an inspection system is that the inspectors' incentives may not be aligned with the public interest.  For example, third-party inspectors who develop reputations for being tough inspectors may find it difficult to attract paying customers. Furthermore, third-party inspectors are typically paid a fixed payment per inspection, which does not give them the strongest financial incentive to follow lengthy inspection protocol requirements.

To shed light on the degree to which inspector incentives may be misaligned with the public good, and to test ways that government agencies can encourage inspectors to behave in ways that better align with the public good, EPIC is collaborating with a state environmental agency. In an experimental design, the agency is testing financial (penalties) and non-financial interventions aimed at encouraging better compliance and more truthful reporting among third-party lead inspectors. The results of the experiment are expected to be available at the end of 2019.

Resource-conserving Technologies for Environmental Gains

To mitigate climate change and reduce pollution, environmental scientists and practitioners promote the adoption of energy-efficient technologies. To mitigate water scarcity and facilitate climate change adaptation, they promote the adoption of water-efficient technologies. To mitigate fuelwood scarcity and the ecosystem-damaging effects of fuel-wood extraction, they promote fuel-efficient cookstoves. To mitigate agriculture and forestry’s effects on the environment, they promote the adoption of land-efficient (“land sparing”) or input-efficient (precision agriculture) technologies. Proponents also claim these technologies, by saving people money, directly improve the welfare of people who adopt them, particularly in low-income communities around the world. But there are good theoretical reasons to doubt these claims, and conflicting evidence about their veracity.

To evaluate these claims with data, EPIC works with scientists, engineers, and programs that encourage households and businesses to adopt resource-conserving technologies. The experiments aim to estimate the environmental and human welfare impacts of the technologies and contrast the actual impacts with the predicted impacts made by engineers. In the water-efficient technology context, for example, EPIC has shown that the actual impacts of the technology on residential water consumption are less than a third of what engineers predict. Moreover, the average household does not benefit from adopting the technology if it has to pay the full purchase price. The experiments also shed light on the ways in which engineering models could be made more accurate.

Improving Regulatory Compliance: Announced vs. Unannounced Inspections

Although environmental inspections are widely implemented at significant taxpayer expense, there is no empirical evidence on the effectiveness of announcing an inspection in advance. Announced inspections are less costly for both the regulated entity and the regulator, but whether they lead to more or less compliance depends on why entities fail to comply. If entities deliberately violate the rules based on rational cost-benefit calculations, unannounced inspections are predicted to be more effective. If entities fail to comply because the regulations are complex and entities do not understand how they apply, announced inspections are predicted to be no less effective than unannounced inspections. Announced inspections may, in fact, be more effective because they give entities an incentive to learn the regulations and “self-audit,” which familiarizes the entity with its own operations and potentially leads it to correct more violations than would be uncovered by an unannounced inspection. We compare long term compliance outcomes from a natural field experiment in which we randomly assigned regulated entities to announced or surprise (unannounced) inspections.

Exposure-Enhancing Interventions that Encourage Persistent Behavioral Change

Pro-environmental technologies are widely promoted for conserving resources and mitigating environmental harm, but the impacts from their adoption will be blunted if they are subsequently disadopted. Technology disadoption is a challenge in development and addressing climate change, as well as other environmental contexts, including agriculture, energy and water efficiency, and sanitation.

We present experimental evidence that exposure to a good can boost subsequent use of the good. As part of a randomized controlled trial in Costa Rica, plumbers installed low flow shower heads and faucet aerators, and a treatment group was offered a cash bonus for keeping the technology installed for at least four months. We find that households that were exposed to the technology for at least four months because of the incentive were very likely to continue using the technology for at least a year after the exposure incentive was no longer being offered, which is consistent with the hypothesized mechanisms for disadoption of exposure-enhanced goods.

Capacity Building and Science Communication for Climate Change Adaptation

Encouraging adaptation to climate change is fundamentally about encouraging changes in human behavior. Governments, nonprofits, and multi-lateral institutions have spent hundreds of millions of dollars on adaptation projects, but we still don’t know which project components are effective for changing human behavior. We use a randomized natural field experiment to examine the impact of two extremely common components of adaptation projects: capacity building and the dissemination of climate science. In collaboration with a local research center, we developed a workshop to deliver these adaptation project components. Within a group of more than 200 management councils of community water systems in an arid region of Central America, we randomly assigned whether the workshop was delivered in order to assess the impact of capacity building and dissemination of climate science on adaptation behavior.

Peer Comparisons to Reduce Human Pressures on the Environment

Whether at our homes or at our businesses, we look to what others are doing as a guide for our own behaviors. So, when designing environmental programs, we may be able to influence human behavior by offering information about the behaviors of peers. For example, showing households in the U.S. how their energy or water use compares to their neighbors has been shown to reduce energy and water use by 2%-5% in tens of large, experimental trials. Importantly, delivering this information is inexpensive and, in at least two studies, the behavior change persists over long time periods.

EPIC is interested in understanding how these peer comparisons work best and the range of actors for whom they work. For example, although we have good evidence that peer comparisons can affect household behaviors, we do not know if they can also affect, in the same desired direction, the behaviors of businesses and other institutions. EPIC has piloted a peer comparison experiment with polluting facilities in 2017-18, and plans to scale up that experiment in 2019.