Environmental Regulations and the Clean-Up of Manufacturing: Plant-Level Evidence From Canada

86 Pages Posted: 1 Feb 2018

See all articles by Nouri Najjar

Nouri Najjar

University of British Columbia (UBC)

Jevan Cherniwchan

University of Alberta - Department of Marketing, Business Economics & Law

Date Written: January 15, 2018

Abstract

For much of the industrialized world, pollution from manufacturing has been falling despite increased output. In this paper, we provide the first estimates of the extent to which environmental regulations have contributed to this “clean-up” of manufacturing by causing: (i) the adoption of cleaner production processes, (ii) the reallocation of output across producers, and (iii) producer entry and exit. To do this, we examine a major revision to Canadian environmental policy using a novel, confidential dataset containing information on the production decisions and pollution emissions of Canadian manufacturing plants. We find regulation explains, at most, 61% of the Canadian clean-up, but the underlying mechanisms differ strikingly across pollutants. We present a stylized model featuring plant heterogeneity to illustrate how the costs of abating pollution can affect the channels through which regulation causes a clean-up.

Keywords: Air Pollution, Manufacturing Clean-Up, Environmental Regulation

JEL Classification: D22, L51, L60, Q52, Q53, Q58

Suggested Citation

Najjar, Nouri and Cherniwchan, Jevan, Environmental Regulations and the Clean-Up of Manufacturing: Plant-Level Evidence From Canada (January 15, 2018). University of Alberta School of Business Research Paper No. 2018-701. Available at SSRN: https://ssrn.com/abstract=3105751 or http://dx.doi.org/10.2139/ssrn.3105751

Nouri Najjar

University of British Columbia (UBC) ( email )

2329 West Mall
Vancouver, British Columbia BC V6T 1Z4
Canada

Jevan Cherniwchan (Contact Author)

University of Alberta - Department of Marketing, Business Economics & Law ( email )

Edmonton, Alberta T6G 2R6
Canada

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