IDEAS home Printed from https://ideas.repec.org/p/feb/natura/00498.html
   My bibliography  Save this paper

The Unintended Disincentive in the Clean Air Act

Author

Listed:
  • John List
  • Warren McHone
  • Daniel Millimet

Abstract

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

  • John List & Warren McHone & Daniel Millimet, 2004. "The Unintended Disincentive in the Clean Air Act," Natural Field Experiments 00498, The Field Experiments Website.
    • Handle: RePEc:feb:natura:00498
    as

    Download full text from publisher

    File URL: http://s3.amazonaws.com/fieldexperiments-papers2/papers/00498.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. James J. Heckman & Hidehiko Ichimura & Petra E. Todd, 1997. "Matching As An Econometric Evaluation Estimator: Evidence from Evaluating a Job Training Programme," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 64(4), pages 605-654.
    2. Richard Blundell & Monica Costa Dias, 2009. "Alternative Approaches to Evaluation in Empirical Microeconomics," Journal of Human Resources, University of Wisconsin Press, vol. 44(3).
    3. 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.
    4. 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.
    5. John A. List & W. Warren McHone, 2000. "Measuring the effects of air quality regulations on "dirty" firm births: Evidence from the neo- and mature-regulatory periods," Papers in Regional Science, Springer;Regional Science Association International, vol. 79(2), pages 177-190.
    6. Paul L. Joskow, 1987. "Productivity Growth and Technical Change in the Generation of Electricity," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 17-38.
    7. Rajeev H. Dehejia & Sadek Wahba, 2002. "Propensity Score-Matching Methods For Nonexperimental Causal Studies," The Review of Economics and Statistics, MIT Press, vol. 84(1), pages 151-161, February.
    8. Eichler, Martin & Lechner, Michael, 2002. "An evaluation of public employment programmes in the East German State of Sachsen-Anhalt," Labour Economics, Elsevier, vol. 9(2), pages 143-186, April.
    9. Bratberg, Espen & Grasdal, Astrid & Risa, Alf Erling, 2002. " Evaluating Social Policy by Experimental and Nonexperimental Methods," Scandinavian Journal of Economics, Wiley Blackwell, vol. 104(1), pages 147-171.
    10. Stock, James H & Wright, Jonathan H & Yogo, Motohiro, 2002. "A Survey of Weak Instruments and Weak Identification in Generalized Method of Moments," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(4), pages 518-529, October.
    11. J. Vernon Henderson, 2001. "Marshall's Scale Economies," Working Papers 2001-46, Brown University, Department of Economics.
    12. Espen Bratberg & Astrid Grasdal & Alf Erling Risa, 2002. "Evaluating Social Policy by Experimental and Nonexperimental Methods," Scandinavian Journal of Economics, Wiley Blackwell, vol. 104(1), pages 147-171, March.
    13. Michael Greenstone, 2002. "The Impacts of Environmental Regulations on Industrial Activity: Evidence from the 1970 and 1977 Clean Air Act Amendments and the Census of Manufactures," Journal of Political Economy, University of Chicago Press, vol. 110(6), pages 1175-1219, December.
    14. Windmeijer, F A G & Silva, J M C Santos, 1997. "Endogeneity in Count Data Models: An Application to Demand for Health Care," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 12(3), pages 281-294, May-June.
    15. Hausman, Jerry & Hall, Bronwyn H & Griliches, Zvi, 1984. "Econometric Models for Count Data with an Application to the Patents-R&D Relationship," Econometrica, Econometric Society, vol. 52(4), pages 909-938, July.
    16. John Mullahy, 1997. "Instrumental-Variable Estimation Of Count Data Models: Applications To Models Of Cigarette Smoking Behavior," The Review of Economics and Statistics, MIT Press, vol. 79(4), pages 586-593, November.
    17. Henderson, J. Vernon, 2003. "Marshall's scale economies," Journal of Urban Economics, Elsevier, vol. 53(1), pages 1-28, January.
    18. Gollop, Frank M & Roberts, Mark J, 1983. "Environmental Regulations and Productivity Growth: The Case of Fossil-Fueled Electric Power Generation," Journal of Political Economy, University of Chicago Press, vol. 91(4), pages 654-674, August.
    19. 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.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    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. Wenli Yan & Douglas A. Carr, 2013. "Federal Environmental Regulation Impacts on Local Economic Growth and Stability," Economic Development Quarterly, , vol. 27(3), pages 179-192, August.
    4. Liguo Lin & Wei Sun, 2016. "Location choice of FDI firms and environmental regulation reforms in China," Journal of Regulatory Economics, Springer, vol. 50(2), pages 207-232, October.
    5. 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.
    6. Dalia Patino-Echeverri & Dallas Burtraw & Karen Palmer, 2013. "Flexible mandates for investment in new technology," Journal of Regulatory Economics, Springer, vol. 44(2), pages 121-155, October.
    7. Anthony Heyes, 2009. "Is environmental regulation bad for competition? A survey," Journal of Regulatory Economics, Springer, vol. 36(1), pages 1-28, August.
    8. 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.
    9. 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.
    10. 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.
    11. Douglas A. Carr, 2011. "The Intergovernmental Fiscal Effects of the Clean Air Act," Public Finance Review, , vol. 39(6), pages 810-830, November.
    12. 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.
    13. 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.
    14. O. Ashton Morgan & Simon Condliffe, 2009. "Spatial Heterogeneity in Environmental Regulation Enforcement and the Firm Location Decision among U.S. Counties," Working Papers 09-12, Department of Economics, Appalachian State University.
    15. Hallsworth, Michael & List, John A. & Metcalfe, Robert D. & Vlaev, Ivo, 2017. "The behavioralist as tax collector: Using natural field experiments to enhance tax compliance," Journal of Public Economics, Elsevier, vol. 148(C), pages 14-31.
    16. 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.
    17. Heutel, Garth, 2011. "Plant vintages, grandfathering, and environmental policy," Journal of Environmental Economics and Management, Elsevier, vol. 61(1), pages 36-51, January.
    18. Bialek, Sylwia & Gregory, Jack & Revesz, Richard L., 2022. "Still your grandfather's boiler: Estimating the effects of the Clean Air Act's grandfathering provisions," Working Papers 05/2022, German Council of Economic Experts / Sachverständigenrat zur Begutachtung der gesamtwirtschaftlichen Entwicklung.
    19. 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).
    20. Chan, H. Ron & Zhou, Yichen Christy, 2021. "Regulatory spillover and climate co-benefits: Evidence from New Source Review lawsuits," Journal of Environmental Economics and Management, Elsevier, vol. 110(C).
    21. 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.
    22. 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.
    23. Calcott, Paul, 2012. "Regulatory triggers and New Source Review," Resource and Energy Economics, Elsevier, vol. 34(3), pages 337-348.
    24. 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.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. 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.
    2. Slottje, Daniel J. & Millimet, Daniel L. & Buchanan, Michael J., 2007. "Econometric analysis of copyrights," Journal of Econometrics, Elsevier, vol. 139(2), pages 303-317, August.
    3. John A. List & W. Warren McHone & Daniel L. Millimet, 2003. "Effects of air quality regulation on the destination choice of relocating plants," Oxford Economic Papers, Oxford University Press, vol. 55(4), pages 657-678, October.
    4. John A. List & Daniel L. Millimet & Per G. Fredriksson & W. Warren McHone, 2003. "Effects of Environmental Regulations on Manufacturing Plant Births: Evidence from a Propensity Score Matching Estimator," The Review of Economics and Statistics, MIT Press, vol. 85(4), pages 944-952, November.
    5. Fredriksson, Per G. & Millimet, D.L.Daniel L., 2004. "Comparative politics and environmental taxation," Journal of Environmental Economics and Management, Elsevier, vol. 48(1), pages 705-722, July.
    6. Bart, COCKX & Jean, RIES, 2004. "The Exhaustion of Unemployment Benefits in Belgium. Does it Enhance the Probability of Employment ?," LIDAM Discussion Papers IRES 2004016, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    7. Tom Kemeny & Maryann Feldman & Frank Ethridge & Ted Zoller, 2016. "The economic value of local social networks," Journal of Economic Geography, Oxford University Press, vol. 16(5), pages 1101-1122.
    8. Wu, JunJie & Segerson, Kathleen & Wang, Chunhua, 2023. "Is environmental regulation the answer to pollution problems in urbanizing economies?," Journal of Environmental Economics and Management, Elsevier, vol. 117(C).
    9. Adam B. Jaffe & Richard G. Newell & Robert N. Stavins, 2004. "Technology Policy for Energy and the Environment," NBER Chapters, in: Innovation Policy and the Economy, Volume 4, pages 35-68, National Bureau of Economic Research, Inc.
    10. Geoff Perry & Tim Maloney, 2008. "Economic Evaluation of the Training Opportunities Programme in New Zealand," Australian Journal of Labour Economics (AJLE), Bankwest Curtin Economics Centre (BCEC), Curtin Business School, vol. 11(2), pages 163-185.
    11. Mohammad Arzaghi, 2005. "Quality Sorting and Networking: Evidence from the Advertising Agency Industry," Working Papers 05-16, Center for Economic Studies, U.S. Census Bureau.
    12. Vivian C. Wong & Peter M. Steiner & Kylie L. Anglin, 2018. "What Can Be Learned From Empirical Evaluations of Nonexperimental Methods?," Evaluation Review, , vol. 42(2), pages 147-175, April.
    13. Holl, Adelheid, 2004. "Manufacturing location and impacts of road transport infrastructure: empirical evidence from Spain," Regional Science and Urban Economics, Elsevier, vol. 34(3), pages 341-363, May.
    14. Stefan Boes, 2004. "Empirical Likelihood in Count Data Models: The Case of Endogenous Regressors," SOI - Working Papers 0404, Socioeconomic Institute - University of Zurich.
    15. Wang, Liang & Tan, Justin & Li, Wan, 2018. "The impacts of spatial positioning on regional new venture creation and firm mortality over the industry life cycle," Journal of Business Research, Elsevier, vol. 86(C), pages 41-52.
    16. Lin, Jenny X. & Lincoln, William F., 2017. "Pirate's treasure," Journal of International Economics, Elsevier, vol. 109(C), pages 235-245.
    17. Cadot, Olivier & Fernandes, Ana M. & Gourdon, Julien & Mattoo, Aaditya, 2015. "Are the benefits of export support durable? Evidence from Tunisia," Journal of International Economics, Elsevier, vol. 97(2), pages 310-324.
    18. Stavins, Robert & Jaffe, Adam & Newell, Richard, 2000. "Technological Change and the Environment," Working Paper Series rwp00-002, Harvard University, John F. Kennedy School of Government.
    19. Malcolm Keswell & Michael R. Carter, 2011. "Poverty and Land Distribution: Evidence from a Natural Experiment," WIDER Working Paper Series wp-2011-046, World Institute for Development Economic Research (UNU-WIDER).
    20. Colm Harmon & Claire Finn & Arnaud Chevalier & Tarja Viitanen, 2006. "The economics of early childhood care and education : technical research paper for the National Economic and Social Forum," Open Access publications 10197/671, School of Economics, University College Dublin.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:feb:natura:00498. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: David Franks (email available below). General contact details of provider: http://www.fieldexperiments.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.