Public Pressure and the Heterogeneous Effects of Voluntary Pollution Abatement

We focus on the role of public pressure in environmental policy and describe a framework under which it is key to the success of voluntary pollution abatement. We hypothesize that a voluntary pollution abatement program changes the public pressure received by firms albeit differently for participants and nonparticipants. We describe these changes as well as the firm’s emission choices. We argue that, under our assumptions, the effectiveness of a voluntary pollution abatement program in lowering emissions depends on the cost from public scrutiny of participating firms and the associated risk of being labeled greenwashers: greater public scrutiny yields fewer program participants who free-ride on the reputation of the program, thereby increasing its effectiveness in lowering emissions. Our framework provides a narrative for reconciling the mixed empirical results on the effectiveness of voluntary pollution abatement programs and is supported by data from the EPA’s 33/50 program.