Waiting for the Courts: Effects of Policy Uncertainty on Pollution and Investment

Jackson Dorsey ()
Additional contact information
Jackson Dorsey: Indiana University

Environmental & Resource Economics, 2019, vol. 74, issue 4, No 1, 1453-1496

Abstract: Abstract Legal challenges and transitions of political power cause the future of regulatory policies to be uncertain. In this article, I investigate how uncertainty about environmental policy affects investment and emissions at coal-fired power plants. I exploit a legal challenge to the Clean Air Interstate Rule (CAIR) that created variation in the probability that individual plants would need to comply with the new policy. I use a difference-in-differences approach to compare pollution reductions at power plants located in states subject to more uncertainty to plants in states that that were not. I find that plants with a lower probability of being regulated invested in fewer capital-intensive pollution controls and reduced pollution by 13% less on average. Many of these plants did switch to capital-intensive pollution controls after the court upheld CAIR. Policy uncertainty increased compliance costs by $124 million by delaying efficient investments.

Keywords: Policy uncertainty; Investment; Environmental regulation; Air pollution; Electricity (search for similar items in EconPapers)
JEL-codes: D22 D92 L94 Q40 Q52 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
http://link.springer.com/10.1007/s10640-019-00375-2 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kap:enreec:v:74:y:2019:i:4:d:10.1007_s10640-019-00375-2

Ordering information: This journal article can be ordered from
http://www.springer. ... al/journal/10640/PS2

DOI: 10.1007/s10640-019-00375-2

Access Statistics for this article

Environmental & Resource Economics is currently edited by Ian J. Bateman

More articles in Environmental & Resource Economics from Springer, European Association of Environmental and Resource Economists Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().