Assessing the Efficacy of NPDES Regulation: Permit Writers' Decisions, Plants' Responses, and Impact of Pollutants on Water Quality

Abstract

This study provides indirect evidence that the Clean Water Act (CWA), implemented through the National Pollution Discharge Elimination System (NPDES) regulation, has been effective in terms of inducing certain 'best practice' responses from the different 'agents' involved in water pollution and its regulation. Given that cost benefit analyses of the CWA have yielded favorable conclusions, the chapters in this dissertation collect empirical evidence on whether NPDES permit writers pay attention to downstream water quality, if plants are sensitive to ambient pollution, and finally if pollutant discharges have an impact on downstream quality. Previous empirical studies incorporating ambient water quality in effluent limit or abatement choice, or pollutant inputs as a determinant of downstream water quality could not be found. These intermediate relationships are studied with Biochemical Oxygen Demand (BOD) as the primary pollutant and hence Dissolved Oxygen (DO) as the main indicator of water quality. Monthly panel data comprising a sample of 100 plants from Maryland, Virginia and Pennsylvania and 79 pairs of (downstream and upstream) water quality monitoring stations over a period of about 14 years, from 1990 to February 2004, was used. Positive evidence on efficacy of the NPDES regulation is found in all the three aspects investigated. On how regulation is implemented: if average water quality prevailing during past permit cycle is increased by one percent, then limits on BOD concentration (quantity) in the 'new' cycle would be made less stringent by 0.617 (0.322) percent. On how polluters respond to downstream water quality: if average DO prevailing during past three years is reduced by one percent, then concentration (quantity) discharges relative to effluent limits is reduced by 1.301 (1.558) percent. Finally, on how pollutant discharges from point sources have an impact on ambient water quality: if sum of BOD concentration is increased by one mg/L, then downstream net of upstream DO is reduced by 0.005 mg/L.