ES&T LETTERS Critique of the E/J ratio Dear Editor: As a consultant specializing in air pollution reduction and statistical experimental methodology, I strongly object to the central theme and method of Paul Templet's articles (ESSrT May 1993, "The Emissions-to-Jobs Ratio" and Oct. 1993, " C h e m i c a l Industry Spending on Pollution Control"). Templet normalizes the toxic release inventory (TRI) by the number of jobs in the chemical industry (SIC 28) and terms this the "emissionsto-jobs ratio (E/J)." Correlating Pollution Abatement Capital Expenditures (PACE, $) with E/J (lb/job), Templet argues that the more a state spends on pollution controls, the better its economic outlook. First off, Templet's statistical analysis is flawed. He looks at "19 large industrial states" and assesses chemical industry spending on pollution control. He plots PACE vs. E/J and claims R2 of 0.587. This is a rather poor correlation to begin with. However, 14 of the data points are in a cluster near 0 relative PACE and 0 E/J, four more have widely scattered PACE at an E/J of about 4000, and one influential point completely dominates the least squares analysis at E/J of about 14,000, some 250 points below the mean PACE. Removal of this data point reduces the R2 to near zero. That is, there is essentially no correlation between PACE and E/J. Operating costs were also regressed against E/J. The same data clusters are apparent, and removal of one point markedly alters the slope of the correlation. If all emissions in the TRI represented equal risk to the public, if the TRI represented the total environmental risk one were exposed to, and if every dollar spent on pollution control had equal efficacy within and across state lines, only then would I expect an aggregate measure like PACE vs. E/J to have value. Templet states, "the question of whether capital outlay spending significantly affects the level of emissions and the E/J ratio can be addressed by regressing relative PACE versus . . . the E/J ratio." No, it cannot. Causation is fundamentally different from correlation. Statistics quantifies correlation, not causation. Templet errs when he claims that correlation between PACE and 6 A
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E/J shows that "underspending on pollution control results in higher emissions and fewer jobs." I advance an alternative hypothesis, equally supported by Templet's data: More prosperous economies can afford to spend more on pollution abatement. Therefore, it is not the amount of pollution control spending that increases jobs, but rather the increased wealth of the state which is responsible for increased pollution control and jobs. Templet's argument is rather like claiming that buying a luxury car will increase family wealth, and supporting the conjecture by noting the strong correlation between disposable income and purchase of luxury sedans. In fact, for poorer households, purchase of a luxury car will increase the burden to the family. And I contend that forcing already distressed state economies to spend more for pollution control will reduce jobs, not increase them. In contrast to Templet's conjectures, I would argue that Californ i a ' s top-heavy over-regulated economy is directly responsible for the states' high unemployment rate and daily migration of jobs, a contention supported by demographic evidence and directly antithetical to Templet's hypothesis. Under Templet's scenario, California should be prospering but is languishing. This is the same fate other states can expect more costly and complex environmental regulations. Joseph Colannino, P.E. Colannino Consultants Oceanside, CA 92056 The author replies: Dear Editor: I appreciate this opportunity to respond to Mr. Colannino's letter concerning the emissions-to-jobs ratio. Colannino takes issue with two points, that the statistical analysis is not rigorous enough and that spending on pollution control is beneficial to the economy. Colannino takes the traditional view that environmental regulations are harmful to the economy and poses California as the example. This view runs counter to my empirical studies as well as those of Stephen Meyer (MIT) and the Bank of America. Those studies show clearly that those states with good environmental records generally have good economies, that is, envi-
ronment and economy are complementary, not adversarial. I'll return to this issue. Colannino also attacks my statistical analysis. The issue is whether the data support my hypothesis that there is a relationship between chemical industry pollution spending and the E/J ratio and that high E/J can be explained by underspending. The points that cluster are those states which are spending near the national average for their level of emissions (i.e., relative PACE or GAC = 0) which is, as expected, the majority. The interesting point is that they also show an E/J near zero which is why they cluster. The fact that they behave like this supports the hypothesis. I would be more concerned if they were spread across the E/J scale. It's true that the relative PACE regression is sensitive to Louisiana data (with the largest E/J and lowest relative PACE), although the relative GAC data continue to support the hypothesis even with Louisiana removed. However, the analysis would benefit from additional data. Toward this end I redid the analysis using the more recent (1991) data and 25 states' data rather 19. Both relative PACE and GAC again regress significantly and negatively with E/J, and the coefficients are improved (R2 = 0.62 and 0.86, respectively). Removal of the Louisiana data point changes the correlation coefficient, as expected, but both regressions are still significant and the slope retains its negative sign in both cases. Thus the 1991 data for PACE and GAC also support the hypothesis, both with and without the Louisiana data. A time series analysis (19881991) of E/J with U.S. PACE and GAC is significant and negative (R2 = 0.91 and 0.99, respectively), which demonstrates that spending increases drive E/J down. The reverse explanation is nonsensical. Colannino h y p o t h e s i z e s that more prosperous economies can afford to spend more and this explains the correlations. If we accept that it is the economy of the chemical industry within a state, and not the state, that is pertinent to this discussion and that value added by the industry is a useful surrogate for economic prosperity (it is not possible to get private profit data by state) then we can test his hypothesis.
Value added normalized by the jobs criteria (VA/J), to correct for industry size across states, is regressed versus the E/J ratio to determine the significance and direction of the relationship. What I find is that E/J rises with increases in VA/J (R2 = 0.62, p
