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U.S. Equity Markets and Environmental Policy. The Case of Electric Utility Investor Behavior During the Passage of the Clean Air Act Amendments of 1990

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  • J. Diltz

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    Abstract

    We examine electric utilityinvestor reaction surrounding twenty-twomilestones associated with the passage of theClean Air Act Amendments of 1990. Resultssuggest that investors did not react sharply tothe passage of the Amendments. To the extentthat statistically significant effects wereobserved, we interpret the results as moreindicative of investor concern over resolutionof uncertainty surrounding the politicalprocess and resulting provisions than ofconcern over the expected costs of compliancefollowing passage of the Amendments. Weobserved little, if any, difference betweenutilities subject to Phase I restrictions andthose not subject to Phase I. Finally, changesin monthly excess returns appear to haveresulted from changes in U.S. interest ratesand investor concern over power industryderegulation. We view our results as importantbecause any wealth effects due to environmentalregulations represent a real economic costassociated with their implementation. In thissense, we view the results as “good news” forU.S. environmental policy makers. Copyright Kluwer Academic Publishers 2002

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    Bibliographic Info

    Article provided by European Association of Environmental and Resource Economists in its journal Environmental and Resource Economics.

    Volume (Year): 23 (2002)
    Issue (Month): 4 (December)
    Pages: 379-401

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    Handle: RePEc:kap:enreec:v:23:y:2002:i:4:p:379-401

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    Web page: http://www.springerlink.com/link.asp?id=100263

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    Keywords: acid rain; capital markets; Clean Air Act Amendments; electric utility; event study; valuation;

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    1. Tom Tietenberg, 1995. "Tradeable permits for pollution control when emission location matters: What have we learned?," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 5(2), pages 95-113, March.
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    4. Ellerman, A. Denny & Montero, Juan-Pablo, 1998. "The Declining Trend in Sulfur Dioxide Emissions: Implications for Allowance Prices," Journal of Environmental Economics and Management, Elsevier, vol. 36(1), pages 26-45, July.
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    13. Joskow, Paul L & Schmalensee, Richard & Bailey, Elizabeth M, 1998. "The Market for Sulfur Dioxide Emissions," American Economic Review, American Economic Association, vol. 88(4), pages 669-85, September.
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    Cited by:
    1. Ziegler, Andreas & Busch, Timo & Hoffmann, Volker H., 2011. "Disclosed corporate responses to climate change and stock performance: An international empirical analysis," Energy Economics, Elsevier, vol. 33(6), pages 1283-1294.
    2. Anger, Niels & Oberndorfer, Ulrich, 2008. "Firm performance and employment in the EU emissions trading scheme: An empirical assessment for Germany," Energy Policy, Elsevier, vol. 36(1), pages 12-22, January.

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