Environmental Regulation, Investment Timing, and Technology Choice

We began this project interested in collecting real-world' insight about how environmental regulation affects the paper industry. Based on conversations with people in the industry and visits to paper mills, we formulated several hypotheses related to technology choice in new mills and the investment decision for existing plants. We tested these hypotheses using technology choice data for 686 paper mills and annual investment data for 116 mills. Technology choice is influenced by environmental regulation. New mills in states with strict environmental regulations are less likely to employ the more polluting technologies involving pulping. Differences between air and water pollution regulations also emerge, with the dirtiest technology in each medium avoiding those states with the strictest regulations. The magnitudes of the impacts are sizable, with a one standard deviation increase in stringency associated with several percentage point reductions in the probability of choosing a dirty technology. State regulatory stringency and plant technology have little or no effect on annual investment spending at existing plants. However, pollution abatement investment is significantly related to productive (non-abatement) investment. Plants with high abatement investment spend less on productive capital. The magnitude of the impact corresponds to nearly complete crowding out of productive investment by abatement investment. Examining investment timing, we find that abatement and productive investment tend to be concentrated in the same years, consistent with the high cost of shutting down a paper mill for renovations.

© notice, is given to the source. When Do Firms Shift Production Across States to Avoid Environmental Regulation?

which provided financial resources to the Census Research Data Centers. We received helpful comments from Arik Levinson and anonymous reviewers, as well as participants at the Western Economic Associatio

Assessing Multi-Dimensional Performances: Environmental and Economic Outcomes

This study examines the determinants of environmental and economic performance for plants in three traditional smoke-stack industries: pulp and paper, oil, and steel. We combine data from Census Bureau and EPA databases and Compustat on the economic performance, regulatory activity and environmental performance on air and water pollution emissions and toxic releases. We find that plants with higher labor productivity tend to have lower emissions. Regulatory enforcement actions (but not inspections) are associated with lower emissions, and state-level political support for environmental issues is associated with lower water pollution and toxic releases. There is little evidence that plants owned by larger firms perform better, nor do older plants perform worse

Plant Vintage, Technology, and Environmental Regulation

Does the impact of environmental regulation differ by plant vintage and technology? We answer this question using annual Census Bureau information on 116 pulp and paper mills’ vintage, technology, productivity, and pollution abatement operating costs for 1979-1990. We find a significant negative relationship between pollution abatement costs and productivity levels. This is due almost entirely to integrated mills (those incorporating a pulping process), where a one standard deviation increase in abatement costs is predicted to reduce productivity by 5.4 percent. Older plants appear to have lower productivity but are less sensitive to abatement costs, perhaps due to 'grandfathering' of regulations. Mills which undergo renovations are also less sensitive to abatement costs, although these vintage and renovation results are not generally significant. We find similar results using a log-linear version of a three input Cobb-Douglas production function in which we include our technology, vintage, and renovation variables. Sample calculations of the impact of pollution abatement on productivity show the importance of allowing for differences based on plant technology. In a model incorporating technology interactions we estimate that total pollution abatement costs reduce productivity levels by an average of 4.7 percent across all the plants. The comparable estimate without technology interactions is 3.3 percent, approximately 30% lower

Spatial Patterns in Regulatory Enforcement: Local Tests of Environmental Justice

We examine the determinants of environmental regulatory activity (inspections and enforcement actions) for 1616 U.S. manufacturing plants in four large U.S. cities – Los Angeles, Boston, Columbus, and Houston – using data for 2000-2002. The main focus of our study is to examine whether or not regulators treat different segments of the population differently, by directing more regulatory activity at plants in rich, white neighborhoods and less in poor, minority neighborhoods, controlling for characteristics of the plant (size, age, and industry), and the plant’s past environmental performance. To date, tests of “Environmental Justice” hypotheses tend to focus on whether or not polluters are disproportionately likely to locate in neighborhoods with relatively high poor/minority populations, or on whether polluters located in those neighborhoods emit disproportionately high levels of pollution. Focusing instead on the allocation of enforcement activity across neighborhoods within each city allows us to shed light on a key mechanism through which discrepancies in pollution exposure across neighborhoods could arise and persist. Our results show relatively little statistically significant evidence that regulatory activity is less intense near disadvantaged demographic groups. We do find some suggestive coefficients - plants located in minority neighborhoods face less regulatory activity - but this effect is generally insignificant, and plants located in poor neighborhoods face (insignificantly) more regulatory activity. In contrast, we do find significant effects for plant characteristics and political variables, with plants that are larger and more energy-intensive, owned by single-plant firms, and located near politically active and liberal populations, facing more regulatory activity

The Green Industry: An Examination of Environmental Products Manufacturing

The “green industry” is often noted in discussions of the costs and benefits of environmental policy, and it has been characterized as a unique industry with substantial potential for employment growth, well-paying jobs, and export opportunities. In this paper, we examine the characteristics and recent economic performance of the green industry, using establishment-level data on environmental products manufacturers (EPMs) from the 1995 Survey of Environmental Products and Services, together with data from the Annual Survey of Manufactures and various Census of Manufactures. Results suggest that there are some differences between EPMs and their non-EPM counterparts in the same industry, in terms of employment, employee compensation, exports, and productivity. However, we do not find any evidence that EPMs performed any better than otherwise similar plants, in terms of survival, employment growth, wage growth, and export growth. Our findings offer a more complex and nuanced portrayal of the green industry than is typical, and we suggest that this industry may not be as exceptional as is sometimes maintained