Working Paper

Expected versus Actual Outcomes of Environmental Policies: The Clean Water State Revolving Fund

Oct 22, 2015 | Winston Harrington, Anna Malinovskaya

Summary

The Clean Water State Revolving Fund provides funding in each state and Puerto Rico for a wide variety of water quality improvements. This paper looks at data from four states over 2007–2014. Do plants receiving funding reduce their pollutant discharges?

Key Findings

  • Under the Clean Water State Revolving Fund, federal loans for state revolving funds subsidize municipal wastewater treatment; local and state authorities must request loans by stating needs in detail.
  • Contrary to expectation, it seemed that loans were awarded to plants with prior above-average performance, rather than plants with evident problems.
  • The program’s structure permitted comparison of with-and-without and before–after performance of facilities receiving and not receiving loans.
  • Facilities receiving loans from 2008 to 2012 generally performed better in 2014 than in 2012, and the rate of improvement was substantially better than the performance of plants not receiving loans.

Abstract

This paper examines the performance of the Clean Water State Revolving Fund (CWSRF), a federally funded program to provide loans to local publically owned treatment works (POTWs) in four states: Iowa, Indiana, Maryland and Texas. We find that between 2007 and 2014, the typical plant receiving a loan in these states substantially improved the quality of effluent discharges of biochemical oxygen demand (BOD) and organic nitrogen (N) in all four states, compared to a sample of plants in the same states that did not receive loans. We also found, however, that plants receiving loans tended to better the performance of plants that did not receive loans in 2007, before the funds were distributed. Thus, while loans were effective in improving water quality, it appeared that the plants receiving loans were not the plants most in need of improvement, but were already among the best. Thus, state authorities responsible for choosing plants receiving loans favored plants with a record of prior success rather than a record of current need.