RESEARCH DESIGN
Sample and Data Collection
The sample for the study consists of 13 firms whose primary product is pulp and paper. All of the firms included in this study were included in the CEP study. Since pollution reports are filed with the EPA on a plant basis, individual plants of each firm throughout the United States were identified for the study. A list of 13 firms along with their eighty-one plant locations is included in the Appendix. Each plant is required to file a water pollution report on a monthly basis for each pipe in the plant. The report usually indicates the amount of pollution intake and pollution outflow for each important pollution measure specified by the EPA. Pollution data for 1978 was extracted from pollution reports filed by firms with the EPA. Financial data for these firms was extracted from the COMPUSTAT tapes.
Water Pollutants
All types of pulp and paper mills use vast amounts of water. Most of the water is not consumed, it is used and returned to the waterways. The discharged water, if not treated properly before returning to the waterways, brings a variety of waste matter from the mills. The waste matter includes fibers, bark, uncooked wood chips; dissolved solids like carbohydrates and soluble wood matters; and cooking and bleaching chemicals. In order to determine the extent of water pollution caused by the waste matter, the impact of harmful pollutants needs to be related to important pollution measures. Three measures have been considered critical in determining water quality (for example see, EPA, 1976) and have consistently been included in the pollution reports filed by pulp and paper mills with the EPA. These are: Biochemical Oxygen Demand (BOD), Total Suspended Solids (TSS), and pH for water acidity-alkalinity. The Biochemical Oxygen Demand (BOD) measure has been defined as 'a measure of rate at which the oxygen in a sample of water is used up by the natural self-purifying process that breaks down organic pollution such as sewage or various chemicals' (EPA, 1976). The Total Suspended Solids (TSS) of paper mills, which include materials and compounds used in making paper, may remain suspended in the body of water for sometime before settling down to the bottom and may cause fish to die by clogging their respiratory passages. pH is technically a measure of hydrogen ion concentration in a given amount of water and is related directly to the acidity or alkalinity of waste water streams. Extremes or rapid changes in pH create conditions that can kill aquatic life.
POLLUTION: PULP AND PAPER FIRMS 703
Development of a Pollution Index
A methodology similar to the one used by Cannon (1974) for the development of a pollution index for the steel industry has been developed by Freedman and Jaggi (1986) for pulp and paper firms. This methodology is used in this study for developing the pollution performance index. The procedures used in developing the index are briefly described below. From an overall perspective the procedure to measure both BOD and TSS is to compare the outflow from each pipe with the inflow. This results in either an increase or decrease in pollution which is termed a change in pollution emissions. Specifically, to measure BOD pollution, for each outflow pipe a daily average outflow for BOD weight (BODW-measured in pounds per day) and BOD concentration (BODC-measured in milligrams per liter) is computed. This is then compared to BOD concentration of the inflow pipe. However, most of the monthly reports filed with th EPA did not provide information on daily BOD inflow and it was therefore necessary to determine a reasonable level for the intake. Based on a technical report prepared by McDufTie and Haney (1973) a BOD concentration level of 5 was felt to be appropriate. In equation (1) the BOD pollution change is computed. If the BOD weight for the outflow pipe is not available by utilizing water flow (F) per pipe the BOD change can be computed utilizing equation (2).
BOD,,t =1 X BODW,,,t (1)
•' L BODCyJ ' ^ '
BOD^, = (BODCy, - 5) X 8.3 X F,^, (2)
where,
BOD change between input and output for pipe k, plantj, and firm i, BOD concentration for pipe k, plant j, and firm ;, BOD weight for pipe k, plant j, and firm i, Fyi- = Average water flow for each pipe k, plant 7 and firm i.
An average change of BOD for each mill (BODy) is computed by summing the BOD change per pipe in the mill. The average change of BOD for the company as a whole can then be calculated by summing the BOD change per mill. The procedures to measure TSS are similar to those for the BOD. If data for average TSS intake are not available in the report, the daily intake is assumed to be 20 (see McDuffie and Haney, 1973).