The cost of air pollution abatement for French firms: An estimation at the firm-level

We estimate the technology of air pollution abatement, defined as a relation between conventional production, emissions and the inputs specifically allocated to the environmental protection. We use original firm-level data on both air emissions and investments in abatement equipment. We deal with endogeneity issues by exploiting some regional heterogeneity in the performance standards imposed to the firms. Carrying out estimations on an unbalanced panel of 1463 observations over the period 1995-1999, we find that the abatement marginal cost for sulfur dioxides exceeds several times the French current tax rate. This suggests that, for this pollutant, the level of emissions is currently much more determined by the performance standards than by the tax. We cannot conclude as far as the three other considered pollutants are concerned.technology, pollution abatement, environmental regulation, generalized method of moments