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Costs of inefficient regulation: Evidence from the Bakken

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  • Lade, Gabriel
  • Rudik, Ivan

    (Cornell University)

Abstract

Efficient pollution regulation equalizes marginal abatement costs across sources. We study a new flaring regulation in North Dakota and document its efficiency. We attribute most of the observed flaring reductions at new wells in the state since late 2014 to the regulation. We construct firm-specific marginal abatement cost curves and find that the same quantity of flaring reductions could have been achieved at 44% lower cost by taxing flared gas instead of imposing firm-specific requirements. Taxing flared gas at the existing public lands royalty rate would achieve 99% of the flaring reductions at 46% lower cost.

Suggested Citation

  • Lade, Gabriel & Rudik, Ivan, 2020. "Costs of inefficient regulation: Evidence from the Bakken," SocArXiv 3e9xk_v1, Center for Open Science.
    • Handle: RePEc:osf:socarx:3e9xk_v1
    DOI: 10.31219/osf.io/3e9xk_v1
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