The Effectiveness of Litigation as a Policy Instrument: The Case of the New Source Review Settlements
54 Pages Posted: 14 Jun 2019 Last revised: 4 May 2020
Date Written: June 3, 2019
Enforcing regulations through litigation against noncompliant firms is an important policy tool for environmental regulators. In this paper, I provide new empirical evidence on the effectiveness of this mechanism by examining the effects of a major environmental enforcement initiative, which led one-third of the US coal-fired power plant fleet to come under a consent decree. I show that legal settlements arising out of this initiative caused large decreases in pollution emissions, which further led to meaningful improvements in local air quality and decreases in local cardiovascular and respiratory mortality rates. I then show suggestive evidence that in regulated electricity markets average electricity retail price and utility revenues increased following a settlement, implying that a substantial proportion of overall costs were borne by ratepayers.
Keywords: power plants; new source review; environmental regulation; law and economics
JEL Classification: Q30; Q52; K32
Suggested Citation: Suggested Citation