Anticipation and environmental regulation

Katherine Rittenhouse and Matthew Zaragoza-Watkins

Journal of Environmental Economics and Management, 2018, vol. 89, issue C, 255-277

Abstract: When agents expect a change in regulation to change the relative price of new durable goods they may shift purchases forward to avoid compliance costs. In the context of new-vehicle emission standards, prior analyses have not considered this adjustment margin. We model the effects of anticipation on sales and retirements of durable goods, and test our theory's predictions empirically using the 2007 implementation of heavy-duty emission standards. We find evidence that anticipation caused a sales spike just before the policy took effect and a symmetric sales slump after implementation, which resulted in 31,164 more freight-truck sales ahead of the new standard and as much as $118 million in environmental damages over the lifetimes of those vehicles.

JEL-codes: C41 D92 Q58 (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeeman:v:89:y:2018:i:c:p:255-277

DOI: 10.1016/j.jeem.2018.03.005

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