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Averting Regulatory Enforcement: Evidence from New Source Review

Author Info

Listed author(s):
  • Nathaniel O. Keohane
  • Erin T. Mansur
  • Andrey Voynov

Abstract

"This paper explores firms' response to regulatory enforcement. New Source Review (NSR), a provision of the Clean Air Act, imposes stringent emissions limitations on significantly modified older power plants. In 1999, the Environmental Protection Agency (EPA) sued owners of 46 plants for NSR violations. We study how electricity companies respond to both the perceived threat of future action, and the action itself. A discrete choice model estimates plants likelihood of being named in lawsuits increases with large historic emissions and investments. On the eve of the lawsuits, emissions at plants with a one standard deviation greater probability of being sued fell approximately 10%." Copyright (c) 2009, The Author(s) Journal Compilation (c) 2009 Wiley Periodicals, Inc..

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Article provided by Wiley Blackwell in its journal Journal of Economics & Management Strategy.

Volume (Year): 18 (2009)
Issue (Month): 1 (03)
Pages: 75-104

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Handle: RePEc:bla:jemstr:v:18:y:2009:i:1:p:75-104
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Find related papers by JEL classification:
  • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
  • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
  • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects
  • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

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  1. Laplante, Benoit & Rilstone, Paul, 1996. "Environmental Inspections and Emissions of the Pulp and Paper Industry in Quebec," Journal of Environmental Economics and Management, Elsevier, vol. 31(1), pages 19-36, July.
  2. Lyon,Thomas P. & Maxwell,John W., 2004. "Corporate Environmentalism and Public Policy," Cambridge Books, Cambridge University Press, number 9780521819473.
  3. Maloney, Michael T & Brady, Gordon L, 1988. "Capital Turnover and Marketable Pollution Rights," Journal of Law and Economics, University of Chicago Press, vol. 31(1), pages 203-226, April.
  4. Nelson, Randy A, 1984. "Regulation, Capital Vintage, and Technical Change in the Electric Utility Industry," The Review of Economics and Statistics, MIT Press, vol. 66(1), pages 59-69, February.
  5. Bartel, Ann P & Thomas, Lacy Glenn, 1985. "Direct and Indirect Effects of Regulation: A New Look at OSHA's Impact," Journal of Law and Economics, University of Chicago Press, vol. 28(1), pages 1-25, April.
  6. Magat, Wesley A & Viscusi, W Kip, 1990. "Effectiveness of the EPA's Regulatory Enforcement: The Case of Industrial Effluent Standards," Journal of Law and Economics, University of Chicago Press, vol. 33(2), pages 331-360, October.
  7. Glachant, Matthieu, 2007. "Non-binding voluntary agreements," Journal of Environmental Economics and Management, Elsevier, vol. 54(1), pages 32-48, July.
  8. Maxwell, John W & Lyon, Thomas P & Hackett, Steven C, 2000. "Self-Regulation and Social Welfare: The Political Economy of Corporate Environmentalism," Journal of Law and Economics, University of Chicago Press, vol. 43(2), pages 583-617, October.
  9. Anton, W.R.Q.Wilma Rose Q. & Deltas, George & Khanna, Madhu, 2004. "Incentives for environmental self-regulation and implications for environmental performance," Journal of Environmental Economics and Management, Elsevier, vol. 48(1), pages 632-654, July.
  10. Lyon, Thomas P. & Maxwell, John W., 2003. "Self-regulation, taxation and public voluntary environmental agreements," Journal of Public Economics, Elsevier, vol. 87(7-8), pages 1453-1486, August.
  11. Nelson, Randy A & Tietenberg, Tom & Donihue, Michael R, 1993. "Differential Environmental Regulation: Effects on Electric Utility Capital Turnover and Emissions," The Review of Economics and Statistics, MIT Press, vol. 75(2), pages 368-373, May.
  12. Gray, Wayne B. & Deily, Mary E., 1996. "Compliance and Enforcement: Air Pollution Regulation in the U.S. Steel Industry," Journal of Environmental Economics and Management, Elsevier, vol. 31(1), pages 96-111, July.
  13. Murphy, Kevin M & Topel, Robert H, 2002. "Estimation and Inference in Two-Step Econometric Models," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(1), pages 88-97, January.
  14. Juan-Pablo Montero, 1999. "Voluntary Compliance with Market-Based Environmental Policy: Evidence from the U.S. Acid Rain Program," Journal of Political Economy, University of Chicago Press, vol. 107(5), pages 998-1033, October.
  15. List John A. & Millimet Daniel L & McHone Warren, 2004. "The Unintended Disincentive in the Clean Air Act," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 3(2), pages 1-28, February.
  16. Lutz, Stefan & Lyon, Thomas P & Maxwell, John W, 2000. "Quality Leadership When Regulatory Standards Are Forthcoming," Journal of Industrial Economics, Wiley Blackwell, vol. 48(3), pages 331-348, September.
  17. Lence, Sergio H., 2006. "The Economic Effects of Vintage Differentiated Regulations: The Case of New Source Review," Staff General Research Papers Archive 13132, Iowa State University, Department of Economics.
  18. Eckert, Heather, 2004. "Inspections, warnings, and compliance: the case of petroleum storage regulation," Journal of Environmental Economics and Management, Elsevier, vol. 47(2), pages 232-259, March.
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Cited by:

  1. Jinghui Lim, 2016. "The impact of monitoring and enforcement on air pollutant emissions," Journal of Regulatory Economics, Springer, vol. 49(2), pages 203-222, April.
  2. Peter Maniloff, 2016. "Bayesian Learning and Regulatory Deterrence: Evidence from Oil and Gas Production," Working Papers 2016-04, Colorado School of Mines, Division of Economics and Business.
  3. Elaine F. Frey, 2013. "Technology Diffusion and Environmental Regulation: The Adoption of Scrubbers by Coal-Fired Power Plants," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1).
  4. Mieno, Taro & Brozovic, Nicholas, 2012. "Unraveling deterrence effects of regulatory activities under Clean Water Act," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 124612, Agricultural and Applied Economics Association.
  5. Bushnell, James B. & Wolfram, Catherine D., 2012. "Enforcement of vintage differentiated regulations: The case of new source review," Journal of Environmental Economics and Management, Elsevier, vol. 64(2), pages 137-152.
  6. Wayne B. Gray & Jay P. Shimshack, 2011. "The Effectiveness of Environmental Monitoring and Enforcement: A Review of the Empirical Evidence," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 5(1), pages 3-24, Winter.
  7. Alm, James & Shimshack, Jay, 2014. "Environmental Enforcement and Compliance: Lessons from Pollution, Safety, and Tax Settings," Foundations and Trends(R) in Microeconomics, now publishers, vol. 10(4), pages 209-274, December.
  8. Meredith Fowlie & Stephen P. Holland & Erin T. Mansur, 2012. "What Do Emissions Markets Deliver and to Whom? Evidence from Southern California's NOx Trading Program," American Economic Review, American Economic Association, vol. 102(2), pages 965-993, April.
  9. Ian Lange & Joshua Linn, 2008. "Bush v. Gore and the Effect of New Source Review on Power Plant Emissions," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 40(4), pages 571-591, August.
  10. Heutel, Garth, 2011. "Plant vintages, grandfathering, and environmental policy," Journal of Environmental Economics and Management, Elsevier, vol. 61(1), pages 36-51, January.
  11. Linn, Joshua & Mastrangelo, Erin & Burtraw, Dallas, 2013. "Regulating Greenhouse Gases from Coal Power Plants under the Clean Air Act," Discussion Papers dp-13-05, Resources For the Future.
  12. Joshua Linn & Erin Mastrangelo & Dallas Burtraw, 2014. "Regulating Greenhouse Gases from Coal Power Plants under the Clean Air Act," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 1(1), pages 97-134.
  13. Bushnell, James & Wolfram, Catherine, 2008. "Enforcement of Vintage Differentiated Regulations: The Case of New Source Review," Staff General Research Papers Archive 31185, Iowa State University, Department of Economics.
  14. Calcott, Paul, 2012. "Regulatory triggers and New Source Review," Resource and Energy Economics, Elsevier, vol. 34(3), pages 337-348.

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