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Averting Regulatory Enforcement: Evidence from New Source Review

  • Nathaniel Keohane
  • Erin T. Mansur
  • Andrey Voynov

This paper explores firms' response to regulatory enforcement. New Source Review, a provision of the Clean Air Act, imposes stringent emissions limitations on significantly modified older power plants. In 1999, the 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 ten percent.

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File URL: http://www.nber.org/papers/w13512.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 13512.

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Date of creation: Oct 2007
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Publication status: published as Nathaniel O. Keohane & Erin T. Mansur & Andrey Voynov, 2009. "Averting Regulatory Enforcement: Evidence from New Source Review," Journal of Economics & Management Strategy, Blackwell Publishing, vol. 18(1), pages 75-104, 03.
Handle: RePEc:nbr:nberwo:13512
Note: EEE IO
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  1. 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 331-48, September.
  2. 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.
  3. 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.
  4. Murphy, Kevin M & Topel, Robert H, 1985. "Estimation and Inference in Two-Step Econometric Models," Journal of Business & Economic Statistics, American Statistical Association, vol. 3(4), pages 370-79, October.
  5. 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.
  6. 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.
  7. 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.
  8. 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.
  9. Lence, Sergio H., 2006. "The Economic Effects of Vintage Differentiated Regulations: The Case of New Source Review," Staff General Research Papers 13132, Iowa State University, Department of Economics.
  10. John W. Maxwell & Thomas P Lyon & Steven C.. Hackett, 1995. "Self-Regulation and Social Welfare: The Political Economy of Corporate Environmentalism," University of Chicago - George G. Stigler Center for Study of Economy and State 122, Chicago - Center for Study of Economy and State.
  11. 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.
  12. 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 203-26, April.
  13. Glachant, Matthieu, 2007. "Non-binding voluntary agreements," Journal of Environmental Economics and Management, Elsevier, vol. 54(1), pages 32-48, July.
  14. 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.
  15. repec:cup:cbooks:9780521819473 is not listed on IDEAS
  16. 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.
  17. 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.
  18. 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 331-60, October.
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