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Enforcement of Vintage Differentiated Regulations: The Case of New Source Review

  • Bushnell, James
  • Wolfram, Catherine

This paper analyzes the effects of the New Source Review (NSR) environmental regulations on coal-fired electric power plants. Regulations that grew out of the Clean Air Act of 1970 required new electric generating plants to install costly pollution control equipment but exempted existing plants with a grandfathering clause. Existing plants lost their grandfathering status if they made ``major modifications'' to their plants. We examine whether this caused firms to invest less in their old plants, possibly leading to lower efficiency and higher emissions. We find some evidence that the risk of NSR enforcement reduced capital expenditures at plants. However, we find no discernable effect on the operating costs, fuel efficiency or emissions of these plants.

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File URL: http://www.econ.iastate.edu/sites/default/files/publications/papers/p11185-2008-03-22.pdf
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Paper provided by Iowa State University, Department of Economics in its series Staff General Research Papers with number 31185.

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Date of creation: 22 Mar 2008
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Handle: RePEc:isu:genres:31185
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Iowa State University, Dept. of Economics, 260 Heady Hall, Ames, IA 50011-1070

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Web page: http://www.econ.iastate.edu
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  13. Nathaniel Keohane & Erin T. Mansur & Andrey Voynov, 2007. "Averting Regulatory Enforcement: Evidence from New Source Review," NBER Working Papers 13512, National Bureau of Economic Research, Inc.
  14. Goldberg, Pinelopi Koujianou, 1998. "The Effects of the Corporate Average Fuel Efficiency Standards in the US," Journal of Industrial Economics, Wiley Blackwell, vol. 46(1), pages 1-33, March.
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  16. 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 368-73, May.
  17. Christopher R. Knittel, 2002. "Alternative Regulatory Methods And Firm Efficiency: Stochastic Frontier Evidence From The U.S. Electricity Industry," The Review of Economics and Statistics, MIT Press, vol. 84(3), pages 530-540, August.
  18. Heutel, Garth, 2011. "Plant vintages, grandfathering, and environmental policy," Journal of Environmental Economics and Management, Elsevier, vol. 61(1), pages 36-51, January.
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