NDLI: Short-Run and Long-Run Impacts of Environmental Regulations on the U . S . Electricity Sector from 1938-1999

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Short-Run and Long-Run Impacts of Environmental Regulations on the U . S . Electricity Sector from 1938-1999

Content Provider	Semantic Scholar
Author	Clay, Karen Jha, Akshaya Lewis, Joshua Severnini, Edson
Copyright Year	2019
Abstract	Firms can comply with environmental regulations in three ways: they can reduce output, change their mix of variable inputs, or invest in pollution abatement technologies. This paper quantifies the productive efficiency costs of each of these compliance methods for the U.S. electricity production sector. We use newly digitized annual, plant-level data on the vast majority of fossil fuel fired power plants from 1938-1999. This historical sample period allows us the unique opportunity to compare plant operations before versus after the introduction of any air quality regulation in the United States. In particular, our difference-in-differences framework utilizes panel variation in the stringency of environmental regulation generated by the National Ambient Air Quality Standards (NAAQS) implemented in 1972 as part of the Clean Air Act. We find that plants facing stricter environmental regulations reduced their output by 7.0%. However, these plants are unable to adjust labor or capital in response to changing environmental policy; plants facing stricter environmental regulation experienced declines in total factor productivity (TFP) of 6.3%. Both of these effects are persistent, suggesting that existing plants were unable to adapt to the NAAQS even in the long run. JEL Codes: K32, L94, N52, Q48, Q52
File Format	PDF HTM / HTML
Alternate Webpage(s)	https://economics.barnard.edu/sites/default/files/lewis-the_effects_of_the_clean_air_act_on_productivity_in_the_power_industry.pdf
Language	English
Access Restriction	Open
Content Type	Text
Resource Type	Article

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