Public Disclosure of Industrial Pollution: The PROPER Approach for Indonesia?

This paper evaluates the effectiveness of the Program for Pollution Control Evaluation and Rating (PROPER) in Indonesia. PROPER, the first major public disclosure program in the developing world, was launched in June 1995; though it collapsed in 1998 with the Asian financial crisis, it is currently being revived. There have been claims of success for this pioneering scheme, yet little formal analysis has been undertaken. We analyze changes in emissions concentrations (mg/L) using panel data techniques with plant-level data for participating firms and a control group. The results show that there was indeed a positive response to PROPER, especially among firms with poor environmental compliance records. The response was immediate, and firms pursued further emissions reductions in the following months. The total estimated reductions in biochemical oxygen demand (BOD) and chemical oxygen demand (COD) were approximately 32%.

Introduction: In the past decade, public disclosure of pollution has appeared as a new instrument aimed at reducing industrial pollution. One of the first and most notable was the U.S. Toxic Release Inventory program of 1988. The Program for Pollution Control Evaluation and Rating (PROPER) in Indonesia can claim to be the first large-scale program in the developing world.These schemes can be seen as either a complement or a supplement to traditional regulation, the enforcement of which is difficult and expensive but critical for policy success. Information disclosure can also be seen as an alternative to market-based instruments, such as taxes.

Author: Jorge García López, Thomas Sterner, Shakeb Afsah

Source: Goteborg University

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