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Costs of Inefficient Regulation: Evidence from the Bakken

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  • Lade, Gabriel
  • Rudik, Ivan

Abstract

Efficient pollution regulation equalizes marginal abatement costs across sources. We study a new flaring regulation in North Dakota and document its efficiency. We attribute most of the observed flaring reductions at new wells in the state since late 2014 to the regulation. We construct firm-specific marginal abatement cost curves and find that the same quantity of flaring reductions could have been achieved at 44% lower cost by taxing flared gas instead of imposing firm-specific requirements. Taxing flared gas at the existing public lands royalty rate would achieve 99% of the flaring reductions at 46% lower cost.
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  • Lade, Gabriel & Rudik, Ivan, 2018. "Costs of Inefficient Regulation: Evidence from the Bakken," 2018 Annual Meeting, August 5-7, Washington, D.C. 274448, Agricultural and Applied Economics Association.
    • Handle: RePEc:ags:aaea18:274448
    DOI: 10.22004/ag.econ.274448
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    Cited by:

    1. Blundell, Wesley & Kokoza, Anatolii, 2022. "Natural gas flaring, respiratory health, and distributional effects," Journal of Public Economics, Elsevier, vol. 208(C).
    2. Timothy Fitzgerald, 2024. "Regulatory capture in a resource boom," Public Choice, Springer, vol. 198(1), pages 93-127, January.
    3. Xinming Du & Muye Ru & Douglas Almond, 2024. "Rapid Increases in Methane Concentrations following August 2020 Suspension of the US Methane Rule," NBER Chapters, in: Environmental and Energy Policy and the Economy, volume 6, National Bureau of Economic Research, Inc.
    4. Alex Hollingsworth & Taylor Jaworski & Carl Kitchens & Ivan J. Rudik, 2022. "Economic Geography and the Efficiency of Environmental Regulation," NBER Working Papers 29845, National Bureau of Economic Research, Inc.
    5. Cao, Jing & Ho, Mun S. & Ma, Rong & Zhang, Yu, 2024. "Transition from plan to market: Imperfect regulations in the electricity sector of China," Journal of Comparative Economics, Elsevier, vol. 52(2), pages 509-533.
    6. Chen, Fanglin & Zhang, Tianzi & Chen, Zhongfei, 2024. "Assessment of environmental concern for enterprise pollution reduction," Economic Analysis and Policy, Elsevier, vol. 81(C), pages 772-786.
    7. Lange, Ian & Redlinger, Michael, 2019. "Effects of stricter environmental regulations on resource development," Journal of Environmental Economics and Management, Elsevier, vol. 96(C), pages 60-87.
    8. Mark Agerton & Ben Gilbert & Gregory B. Upton Jr., 2021. "The Economics of Natural Gas Venting, Flaring and Leaking in U.S. Shale: An Agenda for Research and Policy," Working Papers 2021-02, Colorado School of Mines, Division of Economics and Business.
    9. Kenneth Gillingham & James H. Stock, 2018. "The Cost of Reducing Greenhouse Gas Emissions," Journal of Economic Perspectives, American Economic Association, vol. 32(4), pages 53-72, Fall.
    10. Žiga Kotnik & Maja Klun & Renata Slabe-Erker, 2020. "Identification of the Factors That Affect the Environmental Administrative Burden for Businesses," Sustainability, MDPI, vol. 12(16), pages 1-15, August.

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    More about this item

    Keywords

    Resource and Environmental Policy Analysis; Environmental and Nonmarket Valuation; Production Economics;
    All these keywords.

    JEL classification:

    • L71 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Mining, Extraction, and Refining: Hydrocarbon Fuels
    • Q3 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation
    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy

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