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Regional agglomeration of major risky activities and environmental policies/ L'agglomeration regionale des activites comportant des risuques majeures et les politiques environnementales.

Article Excerpt
Major industrial accidents have occurred and do continue to occur world-wide. They show the importance of good management of industrial/environmental risks which are likely to be amplified by a concentration of risky activities. Can public environmental policy avoid such a concentration? This is the question addressed in this article. Using a two-region equilibrium model in a monopolistic competition framework, the most striking result obtained is that the common form of environmental regulations that impact on marginal costs exacerbate the concentration of such activities. It is then demonstrated that a regionally differentiated regulation, according to firms' location, is necessary in order to limit risky activities' agglomeration.

Un peu partout dans le monde, des accidents industriels majeurs surviennent. Parmi bien d'autres, les catastrophes de Seveso et Bhopal demeurent des symboles. Les >, reponses institutionnelles de la Communaute Europeenne a ces desastres, comportent en particulier des recommandations sur le maintien de distances appropriees entre les etablissements a risque et les aires d'habitation. Curieusement, ces directives n'incluent aucune recommandation concernant l'agglomeration d'etablissements a risque. Pourtant la probabilite qu'une catastrophe industrielle majeure advienne augmente avec une telle concentration, ne serait-ce que par propagation d'une firme a une autre, notamment par explosion ou incendie. Or, il est facile de constater que de telles concentrations existent particulierement dans l'industrie chimique. Ceci est le resultat bien connu des effets d' externalites positives dues a la proximite. Une politique publique environnementale est-elle en mesure d'eviter une telle concentration ? C'est la question que nous posons dans cet article. Nous montrons dans un premier temps, en utilisant un modele >, que la concentration des activites peut etre reduite lorsque les individus prennent en compte dans leur fonction d'utilite les effets negatifs des emissions polluantes: leur propension a migrer vers la > region diminue avec la concentration d'activites a risque. Cependant, nous montrons aussi que des regulations environnementales classiques (comme les Directives Seveso) qui ne tiennent pas compte du risque lie a la concentration ont un effet pervers: elles renforcent la concentration regionale des activites et donc aggravent le risque d'accident majeur. Notre conclusion est que seule une politique environnementale differenciee, selon le degre de concentration regionale des firmes, permet de limiter l'agglomeration dans une meme region de firmes a risque majeur.

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The recent AZF industrial catastrophe in Toulouse (1) and its long lasting consequences have shown, once again, the importance of good management of industrial/environmental risks.

Several major industrial accidents have occurred world-wide; among others, Seveso became a symbol: In July 1976, the explosion of a chemical reactor of the company Icmesa, located in Lombardy (Italy) near the town of Seveso caused a throwing out of dioxins in the atmosphere. The European Community's institutional response to the Seveso disaster was given by Council Directive 82/501/EEC on the major accident hazards of certain industrial activities, the so-called Seveso Directive. (2) Both amendments to that directive, (3) after the Bhopal catastrophe (1984), included recommendations on the storage of dangerous substances. In particular, the new concept of 'land-use planning' was introduced, implying that policies should ensure that appropriate distances between risky establishments and residential areas are guaranteed.

Oddly enough, the directive is not concerned with the agglomeration of such establishments even though its seems evident that a major industrial catastrophe is more likely to occur when there is a concentration of risky activities. In this paper, we assume that agglomeration of risky activities increases the population's vulnerability to high risk of considerable damage compared to its vulnerability to multiple small risks associated with dispersed activities. This assumption can be justified on factual grounds: several arguments suggest that the probability that an accident occurs in a place where many risky activities are concentrated is higher compared to the case of the dispersion of such activities. For example, most of the time, agglomeration of activities corresponds to an agglomeration of population; it follows that the probability of having more casualties if any accident happens in such a place is higher. Moreover, a concentration of chemical (or other dangerous) firms and their output increases the risk of the propagation of any accident from one firm to another in the event of fire or explosion.

As a matter of fact, it is quite easy to verify that such a concentration exists in the chemical industry. (4) Agglomeration of activities in that sector is usually the result of positive externalities of proximity described by the economic geography models: in a monopolistically competitive manufacturing sector, increasing returns and market size effects lead firms to agglomerate. How effective are traditional environmental policies in reducing the risk of major catastrophic accidents, by reducing the concentration of dangerous activities? This is the question we address in this paper. If environmental taxes have strong implications for the profitability of polluting industries, environmental policies may have consequences, in the long run, on entry/exit decisions of firms. Moreover, policy instruments, most of the time, increase marginal costs (when the tax is an effluent fee tied directly to the polluting production) or/and fixed costs (when new high performance equipment is required) and consequently modify the degree of scale economies. As a consequence, the market structure, and then the incentive for firms to agglomerate, could be modified by traditional environmental policies. Behind this intuition is the idea that environmental policies could be a substitute to centrifugal forces and put the brakes on the tendency to agglomerate. This could explain why the Seveso Directive does not include specific recommendations in order to limit the concentration of risky activities.

If this intuition is not true, specific policies must combat the concentration of major risky activities.

Many papers have discussed the spatial dimension of environmental policies. Most of them consider an oligopoly market producing a homogeneous good...

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