Abstract

http://ssrn.com/abstract=935083
 
 

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Averting Enforcement: Strategic Response to the Threat of Environmental Regulation


Nathaniel O. Keohane


Yale University - School of Management

Erin T. Mansur


Dartmouth College - Tuck School of Business; National Bureau of Economic Research (NBER)

Andrey Voynov


Yale University - School of Forestry and Environmental Studies

October 9, 2006


Abstract:     
This paper uses data from the U.S. electric power industry to explore the strategic responses of regulated firms to government enforcement. We focus on the enforcement of New Source Review, a provision of the Clean Air Act that imposes stringent emissions limitations on substantially modified older power plants. Starting in late 1999, the EPA sued the owners of 46 power plants for NSR violations. This paper explores how electric utilities responded to both the perceived threat of future action, and the action itself. We find that the threat of action did have a significant effect on emissions: plants that were likely to be named in the lawsuits (as determined by our discrete choice model of the lawsuit decision) reduced their emissions by about 17 percent on the eve of the lawsuits. After the lawsuits, we find no significant difference between those plants sued and other relatively dirty coal-fired power plants.

Number of Pages in PDF File: 25

Keywords: pollution regulation, enforcement, New Source Review, electricity industry

JEL Classification: L51, L94, Q58, Q52

working papers series





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Date posted: October 6, 2006  

Suggested Citation

Keohane, Nathaniel O. and Mansur, Erin T. and Voynov, Andrey, Averting Enforcement: Strategic Response to the Threat of Environmental Regulation (October 9, 2006). Available at SSRN: http://ssrn.com/abstract=935083 or http://dx.doi.org/10.2139/ssrn.935083

Contact Information

Nathaniel O. Keohane
Yale University - School of Management ( email )
135 Prospect Street
P.O. Box 208200
New Haven, CT 06520-8200
United States
Erin T. Mansur (Contact Author)
Dartmouth College - Tuck School of Business ( email )
Hanover, NH 03755
United States
603 646 2398 (Phone)
National Bureau of Economic Research (NBER) ( email )
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Andrey Voynov
Yale University - School of Forestry and Environmental Studies ( email )
New Haven, CT 06511
United States
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