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The effect of environmental regulation on plant-level product mix: A study of EPA's Cluster Rule

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  • Elrod, Aaron A.
  • Malik, Arun S.

Abstract

This paper examines the effect of the U.S. Environmental Protection Agency's Cluster Rule on the product-mix decisions of plants in the pulp, paper, and paperboard industries. The Cluster Rule combines regulatory requirements from the Clean Air Act and Clean Water Act that are based on plants altering their production processes away from chlorine-based bleaching agents. In addition to, or instead of, altering production processes, plants may plausibly comply with the regulation by reducing output of bleached products or dropping some of these products entirely. Using a difference-in-difference-in-differences approach, we find evidence that plants facing both air and water Cluster Rule regulation (treatment group) are more likely to drop bleached products relative to unbleached products compared to plants facing only air Cluster Rule regulation (control group). Furthermore, we find evidence that plants in the control group alter their product mixes toward bleached products.

Suggested Citation

  • Elrod, Aaron A. & Malik, Arun S., 2017. "The effect of environmental regulation on plant-level product mix: A study of EPA's Cluster Rule," Journal of Environmental Economics and Management, Elsevier, vol. 83(C), pages 164-184.
    • Handle: RePEc:eee:jeeman:v:83:y:2017:i:c:p:164-184
    DOI: 10.1016/j.jeem.2017.03.002
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    7. Weihao Zhang & Helian Xu & Yuanyuan Xu, 2023. "Does Stronger Environmental Regulation Promote Firms’ Export Sophistication? A Quasi-Natural Experiment Based on Sewage Charges Standard Reform in China," Sustainability, MDPI, vol. 15(11), pages 1-17, June.
    8. He, Wenjian & Chen, Xiaoyang & Liu, Zhiyong John, 2022. "Can anti-corruption help realize the “strong” Porter Hypothesis in China? Evidence from Chinese manufacturing enterprises," Journal of Asian Economics, Elsevier, vol. 80(C).
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    11. Silva, Elvira & Magalhães, Manuela, 2023. "Environmental efficiency, irreversibility and the shadow price of emissions," European Journal of Operational Research, Elsevier, vol. 306(2), pages 955-967.
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    14. Marc St‐Pierre & Aaron A. Elrod, 2022. "The perverse effect of environmental regulation on emissions: The role of product‐mix changes," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 24(1), pages 197-235, February.
    15. Hu, Yucai & Ren, Shenggang & Wang, Yangjie & Chen, Xiaohong, 2020. "Can carbon emission trading scheme achieve energy conservation and emission reduction? Evidence from the industrial sector in China," Energy Economics, Elsevier, vol. 85(C).
    16. Zhang, Dongyang, 2022. "Environmental regulation, green innovation, and export product quality: What is the role of greenwashing?," International Review of Financial Analysis, Elsevier, vol. 83(C).
    17. Morgan, Cynthia & Pasurka, Carl & Shadbegian, Ron & Belova, Anna & Casey, Brendan, 2023. "Estimating the cost of environmental regulations and technological change with limited information," Ecological Economics, Elsevier, vol. 204(PA).
    18. Fraas, Arthur G. & Kopits, Elizabeth & Wolverton, Ann, 2021. "A Retrospective Review of Retrospective Cost Analyses," RFF Working Paper Series 21-29, Resources for the Future.
    19. Ana Espinola-Arredondo & Felix Munoz-Garcia & Dolores Garrido, 2023. "Measuring regulatory errors from environmental policy uncertainty," Journal of Regulatory Economics, Springer, vol. 64(1), pages 48-65, December.

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    More about this item

    Keywords

    Environmental regulation; Plant-level product mix; Cluster Rule; Difference-in-differences; Pulp and paper;
    All these keywords.

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L69 - Industrial Organization - - Industry Studies: Manufacturing - - - Other
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling

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