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The Cost Of Environmental Protection

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  • Richard D. Morgenstern
  • William A. Pizer
  • Jhih-Shyang Shih

Abstract

Reported expenditures for environmental protection are often cited as an assessment of the burden of current regulatory efforts. However, the potential for both incidental savings and uncounted costs means that the actual burden could be either higher or lower than these reported values. Using a production cost model that considers the possible interaction between environmental and non-environmental expenditures, we directly estimate the dollar-for-dollar incidental savings/uncounted costs arising from a one-dollar increase in reported environmental expenditures. Although recent literature supports the idea that reported expenditures probably understate the actual burden, we find no such evidence in the manufacturing sector based on a large panel of plant-level data. In one industry, we find statistically significant overstatement. In three others, we find no significant deviation in either direction. We conclude that, although cost estimates are not overstated on average, variation and uncertainty exist at the industry level, with some plants experiencing savings and others possibly facing uncounted burdens. © 2001 by the President and Fellows of Harvard College and the Massachusetts Institute of Technology

Suggested Citation

  • Richard D. Morgenstern & William A. Pizer & Jhih-Shyang Shih, 2001. "The Cost Of Environmental Protection," The Review of Economics and Statistics, MIT Press, vol. 83(4), pages 732-738, November.
  • Handle: RePEc:tpr:restat:v:83:y:2001:i:4:p:732-738
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    Cited by:

    1. Wayne B. Gray, 2015. "Environmental regulations and business decisions," IZA World of Labor, Institute for the Study of Labor (IZA), pages 187-187.
    2. Shital Sharma, 2013. "Environmental Regulation, Abatement, and Productivity: A Frontier Analysis," Working Papers 13-51, Center for Economic Studies, U.S. Census Bureau.
    3. Anna Belova & Wayne B. Gray & Joshua Linn & Richard D. Morgenstern, 2013. "Environmental Regulation And Industry Employment: A Reassessment," Working Papers 13-36, Center for Economic Studies, U.S. Census Bureau.
    4. repec:spr:agfoec:v:5:y:2017:i:1:d:10.1186_s40100-017-0080-2 is not listed on IDEAS
    5. Isaksson, Lena Hoglund, 2005. "Abatement costs in response to the Swedish charge on nitrogen oxide emissions," Journal of Environmental Economics and Management, Elsevier, vol. 50(1), pages 102-120, July.
    6. Kneller, Richard & Manderson, Edward, 2012. "Environmental regulations and innovation activity in UK manufacturing industries," Resource and Energy Economics, Elsevier, vol. 34(2), pages 211-235.
    7. Morgenstern, Richard & Shih, Jhih-Shyang & Ho, Mun & Zhang, Xuehua, 2002. "The Near-Term Impacts of Carbon Mitigation Policies on Manufacturing Industries," Discussion Papers dp-02-06-, Resources For the Future.
    8. Wilhelm Althammer & Erik Hille, 2016. "Measuring climate policy stringency: a shadow price approach," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 23(4), pages 607-639, August.
    9. Morgenstern, Richard D. & Ho, Mun & Shih, J.-S.Jhih-Shyang & Zhang, Xuehua, 2004. "The near-term impacts of carbon mitigation policies on manufacturing industries," Energy Policy, Elsevier, vol. 32(16), pages 1825-1841, November.
    10. Michael Gallaher & Cynthia Morgan & Ronald J. Shadbegian, 2008. "Redesign of the 2005 Pollution Abatement Costs and Expenditure Survey," NCEE Working Paper Series 200801, National Center for Environmental Economics, U.S. Environmental Protection Agency, revised Jan 2008.
    11. Morgenstern, Richard & Harrington, Winston & Nelson, Per-Kristian, 1999. "On the Accuracy of Regulatory Cost Estimates," Discussion Papers dp-99-18, Resources For the Future.
    12. Parsons, George R. & Myers, Kelley, 2016. "Fat tails and truncated bids in contingent valuation: An application to an endangered shorebird species," Ecological Economics, Elsevier, vol. 129(C), pages 210-219.
    13. Nigar Hashimzade & Gareth Donald Myles, 2017. "Do Corporate Environmental Contributions Justify the Public Interest Defence?," CESifo Working Paper Series 6755, CESifo Group Munich.
    14. Pizer, William & Kopp, Raymond & Morgenstern, Richard & Harrington, Winston & Shih, Jhih-Shyang, 2002. "Technology Adoption and Aggregate Energy Efficiency," Discussion Papers dp-02-52, Resources For the Future.
    15. Dowlatabadi, Hadi & Boyd, David & MacDonald, Jamie, 2004. "Model, Model on the Screen, What's the Cost of Going Green?," Discussion Papers dp-04-17, Resources For the Future.
    16. Nick Johnstone & Julien Labonne & Célinc Thevenot, 2008. "Environmental policy and economies of scope in facility-level environmental practices," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 9(3), pages 145-166, September.

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