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The effect of water pollution regulation on prices: Evidence from Wisconsin's phosphorus rule and sewer utility bills

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  • Meyer, Andrew
  • Raff, Zach

Abstract

In this paper, we estimate the consumer impacts of Wisconsin's “phosphorus rule”, which created the most stringent statewide water quality and effluent standards for phosphorus in the country. We examine how compliance with the rule affects real billing rates at sewer utilities in Wisconsin, providing the first empirical estimates of water pollution regulation on utility billing rates. We find that compliance with the phosphorous rule increases the average real sewer utility bill in our sample by 7–12%. Our results imply that sewer utilities pass through approximately $65.8 million to residential sewer rate payers annually, which is roughly ⅔ of the total sewer utility compliance costs of the rule. State government subsidies cover an additional ¼ of the sewer utility compliance costs.

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  • Meyer, Andrew & Raff, Zach, 2024. "The effect of water pollution regulation on prices: Evidence from Wisconsin's phosphorus rule and sewer utility bills," Journal of Environmental Economics and Management, Elsevier, vol. 124(C).
    • Handle: RePEc:eee:jeeman:v:124:y:2024:i:c:s0095069623001328
    DOI: 10.1016/j.jeem.2023.102914
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    Cited by:

    1. Wichman, Casey, 2024. "Efficiency, Equity, and Cost-Recovery Trade-Offs in Municipal Water Pricing," RFF Working Paper Series 24-18, Resources for the Future.

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    More about this item

    Keywords

    Environmental compliance cost; Nonpoint source pollution; Pass-through; Sewer utility; Water pollution abatement;
    All these keywords.

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • L95 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Gas Utilities; Pipelines; Water Utilities
    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling

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