Internalizing Externalities through Public Pressure: Transparency Regulation for Fracking and Water Quality

Pietro Bonetti, Christian Leuz and Giovanna Michelon

No 30842, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Responding to the rise of hydraulic fracturing (HF) and risks to water quality, U.S. states mandated disclosure for HF wells. We study whether and how such targeting of corporate externalities with transparency regulation reduces environmental impact. We examine salt concentrations considered HF signatures and find significant reductions in surface water impact between 9-17%, mostly along the intensive margin. Consistent with these findings, we document improvements in operator practices, including fewer wastewater spills. We unpack the transparency mechanism and show that transparency regulation enables social movements and increases public pressure, which in turn drives the documented changes in practices and water quality.

JEL-codes: D62 G38 K22 K32 L71 L72 M41 M48 Q53 (search for similar items in EconPapers)
Date: 2023-01
New Economics Papers: this item is included in nep-ene, nep-env, nep-law and nep-reg
Note: CF EEE POL
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