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Averting Regulatory Enforcement: Evidence from New Source Review |
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| Authors: | Nathaniel O Keohane Erin T Mansur Andrey Voynov |
| Institution: | Yale School of Management and Environmental Defense 257 Park Avenue South New York, NY 10010; Yale School of Management and NBER 135 Prospect Street, P.O. Box 208200 New Haven, CT 06520-8200; Yale School of Forestry and Environmental Studies 205 Prospect Street New Haven, CT 06511 |
| Abstract: | This paper explores firms' response to regulatory enforcement. New Source Review (NSR), a provision of the Clean Air Act, imposes stringent emissions limitations on significantly modified older power plants. In 1999, the Environmental Protection Agency (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 10%. |
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