When the Regulator Goes Home: The Effectiveness of Environmental Oversight

50 Pages Posted: 12 Jun 2019

See all articles by Jason M. Walter

Jason M. Walter

University of Wisconsin - Stout

Zach Raff

University of Wisconsin - Stout

Date Written: May 27, 2019

Abstract

The U.S. EPA designates areas as in non-attainment with National Ambient Air Quality Standards (NAAQS) if ambient air concentrations of certain pollutants exceed standard levels. Stationary sources located in these areas are required to significantly reduce emissions through technological and other requirements; these sources are also subjected to greater regulatory oversight. However, non-attainment is not a permanent designation and regulatory oversight subsides once an area moves out of non-attainment. In this paper we examine whether the additional regulatory oversight of non-attainment designation is successful (and necessary) at reducing emissions from stationary sources. We estimate the effects of an area moving out of non-attainment on emissions at coal-fired power plants located in these areas. We first model the actions of utility managers subjected to emission reduction requirements. The model suggests that firms under additional scrutiny via non-attainment designation intentionally lower emissions. However, when areas exit non-attainment, i.e., direct regulatory oversight subsides, firms under-utilize clean strategies-including technology-which results in emission increases. Empirical analysis results show that boilers with abatement technology installed as a result of non-attainment increase NO x emissions and emission rate by 16% and 9%, respectively, when exiting non-attainment. Extended model results present evidence that regulated firms are less likely to use fully emission control methods in the absence of direct regulatory oversight. Specifically, the emission increases of exiting non-attainment are driven by the under-utilization of abatement technology inputs and the switch to lower quality fuel.

Keywords: coal-fired power plants; environmental regulation; National Ambient Air Quality Standards; nitrous oxide; sulfur dioxide

JEL Classification: D21, Q53, Q58

Suggested Citation

Walter, Jason M. and Raff, Zach, When the Regulator Goes Home: The Effectiveness of Environmental Oversight (May 27, 2019). Available at SSRN: https://ssrn.com/abstract=3394867 or http://dx.doi.org/10.2139/ssrn.3394867

Jason M. Walter

University of Wisconsin - Stout ( email )

Menomonie , WI 54751
United States

Zach Raff (Contact Author)

University of Wisconsin - Stout ( email )

Menomonie , WI 54751
United States

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