Impacts of adjusting environmental regulations when enforcement authority is diffuse: confined animal feeding operations and environmental quality

Environmental Protection Agency (EPA) has recently adjusted regulations governing confined animal feeding operations (CAFOs), significantly increasing the number of regulated firms. A theoretical model is developed to analyze how changes to the number of regulated firms, monitoring effort, and compliance standards affect environmental quality. The model suggests increasing the number of regulated firms, ceteris paribus, has an ambiguous effect on environmental quality, and may actually reduce it. The impact of increasing compliance standards depends on how violations are prosecuted and sanctions are set. Greater monitoring effort increases environmental quality.