Decomposing Changes in Establishment Level Emissions with Entry and Exit

This paper decomposes pollution releases by U.S. manufacturing establishments to show the relative importance of four establishment-level channels: entry, exit, reallocation between survivors, and within-establishment adjustment of emissions intensity. Using a panel of establishment-level output and pollution emissions to air and water for U.S. manufacturers, we decompose changes in pollution emissions into the three channels typically presented in the literature: changes in scale (output), composition (industry market share), and industry-level technique (emissions intensity). We then decompose changes due to industry-level emissions intensity into four establishment level channels for three criteria air pollutants and water pollution. For volatile organic compound emissions, nearly two-thirds of the reduction in sector-level emissions intensity is due to within-establishment reductions in emissions intensity. The other third is driven by reallocation to cleaner establishments. Though the magnitudes differ, results are broadly similar for particulate matter and sulfur dioxide. Onsite releases of effluents to water exhibit a similar pattern, though the relative importance of reallocation is greater. Additionally we find that within-establishment reductions in water emissions are associated with increased transfers to offsite publicly owned treatment facilities. The heterogeneous contributions across channels suggests that the cleanup in the U.S. manufacturing sector likely has multiple sources.