Regulation-Induced Pollution Substitution

By Matthew Gibson. Review of Economics and Statistics, 2019

133 citations recorded by the source corpus.

Environmental regulations may cause firms to reoptimize over pollution inputs. By regulating air emissions in particular counties, the Clean Air Act (CAA) gives firms incentives to substitute toward polluting other media, like waterways, and toward pollution from plants in other counties. I test these hypotheses using the EPA Toxic Release Inventory (TRI). Regulated plants increase their ratio of water-to-air emissions by 177% (102 log points) and their level of water emissions by 105% (72 log points). Regulation of an average plant increases air emissions at unregulated plants within the same firm by 11%.

Subfields: Economics and Econometrics, Strategy and Management

View Paper: https://www.semanticscholar.org/paper/3c704a076fada9a4ae7bdb3f76498e8b8c4f3d32