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The Unintended Disincentive in the Clean Air Act


  • List John A.

    () (University of Maryland)

  • Millimet Daniel L

    () (Southern Methodist University)

  • McHone Warren

    () (University of Central Florida)


The Clean Air Act and its subsequent amendments have been lauded as the primary stimulant to the impressive improvement in local air quality in the US since 1970. A key component of these regulations is the New Source Review (NSR) requirement, which includes the contentious stipulation that when an existing plant seeks to modify its operations, the entire plant must comply with current standards for new sources. This requirement was included to improve air quality in dirty areas, and prevent a deterioration of air quality in clean areas. Yet, whether NSR provides the proper plant-level incentives is unclear: there are strong disincentives to undertake major plant modifications to avoid NSR. In our examination of more than 2500 and 2200 plant-level modification decisions and closures, respectively, we find empirical evidence suggesting that NSR retards modification rates, while doing little to hasten the closure of existing dirty plants.

Suggested Citation

  • 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.
  • Handle: RePEc:bpj:bejeap:v:advances.4:y:2004:i:2:n:2

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    References listed on IDEAS

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    Cited by:

    1. James B. Bushnell & Howard Chong & Erin T. Mansur, 2009. "Profiting from Regulation: An Event Study of the EU Carbon Market," NBER Working Papers 15572, National Bureau of Economic Research, Inc.
    2. Nathaniel O. Keohane & Erin T. Mansur & Andrey Voynov, 2009. "Averting Regulatory Enforcement: Evidence from New Source Review," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 18(1), pages 75-104, March.
    3. John A. List, 2014. "Using Field Experiments to Change the Template of How We Teach Economics," The Journal of Economic Education, Taylor & Francis Journals, vol. 45(2), pages 81-89, June.
    4. Michael Greenstone & John A. List & Chad Syverson, 2011. "The Effects of Environmental Regulation on the Competiveness of U.S. Manufacturing," Working Papers 11-03, Center for Economic Studies, U.S. Census Bureau.
    5. Adair, Sarah K. & Hoppock, David C. & Monast, Jonas J., 2014. "New Source Review and coal plant efficiency gains: How new and forthcoming air regulations affect outcomes," Energy Policy, Elsevier, vol. 70(C), pages 183-192.
    6. List, John A. & McHone, W. Warren & Millimet, Daniel L., 2004. "Effects of environmental regulation on foreign and domestic plant births: is there a home field advantage?," Journal of Urban Economics, Elsevier, vol. 56(2), pages 303-326, September.
    7. Heutel, Garth, 2011. "Plant vintages, grandfathering, and environmental policy," Journal of Environmental Economics and Management, Elsevier, vol. 61(1), pages 36-51, January.
    8. Wright, Christopher, 2006. "Estimating the Effect of the Chesapeake Bay Program on Application Rates for Enrollment in the Environmental Quality Incentive Program: A Case Study of Pennsylvania," 2006 Annual meeting, July 23-26, Long Beach, CA 21164, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    9. Sánchez-Braza, Antonio & Pablo-Romero, María del P., 2014. "Evaluation of property tax bonus to promote solar thermal systems in Andalusia (Spain)," Energy Policy, Elsevier, vol. 67(C), pages 832-843.
    10. Anthony Heyes, 2009. "Is environmental regulation bad for competition? A survey," Journal of Regulatory Economics, Springer, vol. 36(1), pages 1-28, August.
    11. 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.
    12. Douglas A. Carr, 2011. "The Intergovernmental Fiscal Effects of the Clean Air Act," Public Finance Review, , vol. 39(6), pages 810-830, November.
    13. 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.
    14. Morgan, O. Ashton & Condliffe, Simon, 2009. "Spatial Heterogeneity in Environmental Regulation Enforcement and the Firm Location Decision among U.S. Counties," The Review of Regional Studies, Southern Regional Science Association, vol. 39(3), pages 239-252.
    15. Hanna Rema Nadeem & Oliva Paulina, 2010. "The Impact of Inspections on Plant-Level Air Emissions," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 10(1), pages 1-33, March.
    16. 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.
    17. Jeffrey Flory & Uri Gneezy & Kenneth Leonard & John List, 2012. "Sex, competitiveness, and investment in offspring: On the origin of preferences," Artefactual Field Experiments 00072, The Field Experiments Website.
    18. Calcott, Paul, 2012. "Regulatory triggers and New Source Review," Resource and Energy Economics, Elsevier, vol. 34(3), pages 337-348.
    19. Patino Echeverri, Dalia & Burtraw, Dallas & Palmer, Karen, 2012. "Flexible Mandates for Investment in New Technology," Discussion Papers dp-12-14, Resources For the Future.

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