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Averting Regulatory Enforcement: Evidence from New Source Review

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  • Nathaniel O. Keohane
  • Erin T. Mansur
  • Andrey Voynov

Abstract

This paper explores firms' response to regulatory enforcement. New Source Review (NSR), a provision of the Clean Air Act, imposes stringent emissions limitations on significantly modified older power plants. In 1999, the Environmental Protection Agency (EPA) sued owners of 46 plants for NSR violations. We study how electricity companies respond to both the perceived threat of future action, and the action itself. A discrete choice model estimates plants likelihood of being named in lawsuits increases with large historic emissions and investments. On the eve of the lawsuits, emissions at plants with a one standard deviation greater probability of being sued fell approximately 10%.

Suggested Citation

  • Nathaniel O. Keohane & Erin T. Mansur & Andrey Voynov, 2009. "Averting Regulatory Enforcement: Evidence from New Source Review," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 18(1), pages 75-104, March.
    • Handle: RePEc:bla:jemstr:v:18:y:2009:i:1:p:75-104
    DOI: 10.1111/j.1530-9134.2009.00208.x
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    More about this item

    JEL classification:

    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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