Reformed incentives for third-party auditors lead to reduced emissions from industrial plants

In this two-year field experiment in the Indian state of Gujarat, Duflo et al. (2013) altered the market structure for environmental audits of industrial plants to incentivize accurate reporting and showed that third-party auditors who are chosen and paid by the firms that they audit tend to systematically report plant emissions just below the legal standard. The treatment caused the auditors to report more truthfully and the treatment plants to reduce their pollution emissions.

By Esther Duflo, Michael Greenstone, Rohini Pande and Nicholas Ryan (2013)