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Enforcement of Vintage Differentiated Regulations: The Case of New Source Review

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  • Bushnell, James
  • Wolfram, Catherine

Abstract

This paper analyzes the effects of the New Source Review (NSR) environmentalregulations on coal-fired electric power plants. Regulations that grew out of the Clean Air Act of 1970 required new electric generating plants to install costly pollution control equipment but exempted existing plants. Existing plants lost their exemptions if they made ``major modifications.'' We examine whether this caused firms to invest less in grandfathered plants, possibly leading to lower efficiency and higher emissions. We find evidence that heightened NSR enforcement reduced capital expenditures at vulnerableplants. However, we find no discernable effect on other inputs or emissions.This paper analyzes the effects of the New Source Review (NSR) environmental regulations on coal-fired electric power plants. Regulations that grew out of the Clean Air Act of 1970 required new electric generating plants to install costly pollution control equipment but exempted existing plants. Existing plants lost their exemptions if they made ``major modifications.'' We examine whether this caused firms to invest less in grandfathered plants, possibly leading to lower efficiency and higher emissions. We find evidence that heightened NSR enforcement reduced capital expenditures at vulnerable plants. However, we find no discernable effect on other inputs or emissions.

Suggested Citation

  • Bushnell, James & Wolfram, Catherine, 2010. "Enforcement of Vintage Differentiated Regulations: The Case of New Source Review," Staff General Research Papers Archive 31805, Iowa State University, Department of Economics.
    • Handle: RePEc:isu:genres:31805
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    1. Heutel, Garth, 2011. "Plant vintages, grandfathering, and environmental policy," Journal of Environmental Economics and Management, Elsevier, vol. 61(1), pages 36-51, January.
    2. Joshua Linn & Erin Mastrangelo & Dallas Burtraw, 2014. "Regulating Greenhouse Gases from Coal Power Plants under the Clean Air Act," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 1(1), pages 97-134.
    3. Steven Shavell, 2007. "On Optimal Legal Change, Past Behavior, and Grandfathering," NBER Working Papers 13563, National Bureau of Economic Research, Inc.
    4. Popp, David & Newell, Richard G. & Jaffe, Adam B., 2010. "Energy, the Environment, and Technological Change," Handbook of the Economics of Innovation, in: Bronwyn H. Hall & Nathan Rosenberg (ed.), Handbook of the Economics of Innovation, edition 1, volume 2, chapter 0, pages 873-937, Elsevier.
    5. 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.
    6. Ian Lange & Joshua Linn, 2008. "Bush v. Gore and the Effect of New Source Review on Power Plant Emissions," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 40(4), pages 571-591, August.

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    More about this item

    Keywords

    New Source Review; Environmental Regulations; productivity; electricity;
    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
    • 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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