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When do Firms Go Green? Comparing Price Incentives with Command and Control Regulations in India

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  • Ann E. Harrison
  • Ben Hyman
  • Leslie A. Martin
  • Shanthi Nataraj

Abstract

India has a multitude of environmental regulations but a history of poor enforcement. Between 1996 and 2004, India's Supreme Court required 17 cities to enact Action Plans to reduce air pollution through a variety of command-and-control (CAC) environmental regulations. We compare the impacts of these regulations with the impact of changes in coal prices on establishment-level pollution abatement, coal consumption, and productivity growth. We find that higher coal prices reduced coal use within establishments, with price elasticities similar to those found in the US. In addition, higher coal prices are associated with lower pollution emissions at the district level. CAC regulations did not affect within-establishment pollution control investment or coal use, but did impact the extensive margin, increasing the share of large establishments investing in pollution control and reducing the entry of new establishments. For reducing SO2 emissions, our results suggest that higher coal prices were more effective in improving environmental outcomes than command and control measures.

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  • Ann E. Harrison & Ben Hyman & Leslie A. Martin & Shanthi Nataraj, 2015. "When do Firms Go Green? Comparing Price Incentives with Command and Control Regulations in India," Working Papers WR-1133, RAND Corporation.
    • Handle: RePEc:ran:wpaper:wr-1133
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    3. Zhengge Tu & Tao Zhou & Ning Zhang, 2019. "Does China’s Pollution Levy Standards Reform Promote Green Growth?," Sustainability, MDPI, vol. 11(21), pages 1-18, November.
    4. Hao, Miao & Lyv, Kangjuan & Li, Shiyuan & Hu, Wuyang, 2021. "How does environmental regulation affect firm innovation? Evidence based on corporate life cycle," MPRA Paper 110971, University Library of Munich, Germany.
    5. Puja Singhal, 2018. "Are Emission Performance Standards Effective in Pollution Control? Evidence from the EU's Large Combustion Plant Directive," Discussion Papers of DIW Berlin 1773, DIW Berlin, German Institute for Economic Research.
    6. Puja Singhal, 2018. "Environmental Regulations: Lessons from the Command-and-Control Approach," DIW Roundup: Politik im Fokus 124, DIW Berlin, German Institute for Economic Research.
    7. Götz, Martin, 2018. "Financial constraints and corporate environmental responsibility," SAFE Working Paper Series 241, Leibniz Institute for Financial Research SAFE.
    8. Goetz, Martin, 2019. "Financing conditions and toxic emissions," SAFE Working Paper Series 254, Leibniz Institute for Financial Research SAFE.
    9. Zhiyong Zheng & Yongbin Xu, 2022. "Environmental Regulation, Family Involvement and Green Innovation Efficiency—Based on Sew Theory Framework," Sustainability, MDPI, vol. 14(20), pages 1-21, October.
    10. Li, Hai-ling & Zhu, Xue-hong & Chen, Jin-yu & Jiang, Fei-tao, 2019. "Environmental regulations, environmental governance efficiency and the green transformation of China's iron and steel enterprises," Ecological Economics, Elsevier, vol. 165(C), pages 1-1.
    11. Brucal, Arlan & Javorcik, Beata & Love, Inessa, 2019. "Good for the environment, good for business: Foreign acquisitions and energy intensity," Journal of International Economics, Elsevier, vol. 121(C).
    12. Li, Shiyuan, 2021. "Corporate performance under air pollution control: Evidence from “Atmosphere Ten Articles” Policy," MPRA Paper 110974, University Library of Munich, Germany.
    13. Inessa Love & Beata Javorcik & Arlan Brucal, 2017. "Pollution Haven or Halo? Evidence from Foreign Acquisitions in Indonesia," 2017 Meeting Papers 306, Society for Economic Dynamics.

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