Intrafirm Leakage

Abstract

The environmental regulations US firms are exposed to are often place-based, incentivizing firms to move to less regulated counties or states. Consistent with this argument, multiplant firms partially regulated under the ozone regulations of the US Clean Air Act offset regulation-induced reductions among regulated plants with spillovers to unregulated plants and by moving plants out of regulated areas. Taken together, these leakage effects fully offset emissions reductions at regulated plants. Effects are strongest among highly productive firms and those operating in tradable industries.

Keywords: emissions leakage, aggregate effects of regulation, environmental economics, Clean Air Act, industrial emissions

JEL Classification: Q520, Q580, H320, R320