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

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