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Teaching an old dog new tricks: Firm learning from environmental regulation

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  • Galloway, Emily
  • Johnson, Erik Paul

Abstract

We examine a new mechanism by which environmental regulation can increase efficiency: intra-firm knowledge spillovers due to environmental regulation. County-level non-attainment of the National Ambient Air Quality Standards creates spatial variation in the degree of regulatory stringency, as states impose stronger environmental regulation in non-attainment counties. We use this spatial variation to examine how the efficiency of electricity generators responds to increases in regulation. We show that, in response to increased regulatory stringency, electricity generators find technical efficiency enhancements and then transfer these enhancements to other units within their fleet. We find that a change in regulatory stringency translates to within-firm spillovers of 3–4%, and that these gains occur at least 3years after the increase in regulatory stringency.

Suggested Citation

  • Galloway, Emily & Johnson, Erik Paul, 2016. "Teaching an old dog new tricks: Firm learning from environmental regulation," Energy Economics, Elsevier, vol. 59(C), pages 1-10.
    • Handle: RePEc:eee:eneeco:v:59:y:2016:i:c:p:1-10
    DOI: 10.1016/j.eneco.2016.06.023
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    References listed on IDEAS

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    Cited by:

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    8. Jin, Peizhen & Wang, Siyu & Yin, Desheng & Zhang, Hang, 2023. "Environmental institutional supply that shapes a green economy: Evidence from Chinese cities," Technological Forecasting and Social Change, Elsevier, vol. 187(C).
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    10. Aldieri, Luigi & Makkonen, Teemu & Paolo Vinci, Concetto, 2020. "Environmental knowledge spillovers and productivity: A patent analysis for large international firms in the energy, water and land resources fields," Resources Policy, Elsevier, vol. 69(C).
    11. Zhu, Xuehong & Zuo, Xuguang & Li, Hailing, 2021. "The dual effects of heterogeneous environmental regulation on the technological innovation of Chinese steel enterprises—Based on a high-dimensional fixed effects model," Ecological Economics, Elsevier, vol. 188(C).
    12. Peng Hou & Yilin Li & Yong Tan & Yuanjie Hou, 2020. "Energy Price and Energy Efficiency in China: A Linear and Nonlinear Empirical Investigation," Energies, MDPI, vol. 13(16), pages 1-24, August.
    13. Xu Dong & Wensi Fu & Yali Yang & Chenguang Liu & Guizhi Xue, 2022. "Study on the Evaluation of Green Technology Innovation Efficiency and Its Influencing Factors in the Central Plains City Cluster of China," Sustainability, MDPI, vol. 14(17), pages 1-24, September.
    14. Xu Dong & Yali Yang & Qinqin Zhuang & Weili Xie & Xiaomeng Zhao, 2022. "Does Environmental Regulation Help Mitigate Factor Misallocation?—Theoretical Simulations Based on a Dynamic General Equilibrium Model and the Perspective of TFP," IJERPH, MDPI, vol. 19(6), pages 1-21, March.
    15. Yu Hao & Jingwen Huang & Yunxia Guo & Haitao Wu & Siyu Ren, 2022. "Does the legacy of state planning put pressure on ecological efficiency? Evidence from China," Business Strategy and the Environment, Wiley Blackwell, vol. 31(7), pages 3100-3121, November.
    16. Yan, Zheming & Zhou, Zicheng & Du, Kerui, 2023. "How does environmental regulatory stringency affect energy consumption? Evidence from Chinese firms," Energy Economics, Elsevier, vol. 118(C).
    17. Chao Wang & Yue‐Jun Zhang, 2020. "Does environmental regulation policy help improve green production performance? Evidence from China's industry," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 27(2), pages 937-951, March.
    18. Tan, Jianhua & Chen, Tao & Zhang, Peng & Chan, Kam C., 2021. "Environmental rule enforcement and cash holdings: Evidence from a natural experiment," Economic Modelling, Elsevier, vol. 103(C).
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    20. Wen, Huwei & Wen, Changyong & Lee, Chien-Chiang, 2022. "Impact of digitalization and environmental regulation on total factor productivity," Information Economics and Policy, Elsevier, vol. 61(C).

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    More about this item

    Keywords

    Firm learning; Environmental regulation; Clean Air Acts; Electricity generation; Process innovation; Technical efficiency;
    All these keywords.

    JEL classification:

    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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