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Applications (Applied Micro) Seminars

Is Air Pollution Regulation Too Stringent?

Joseph Shapiro (Berkeley)

Monday 18 May 2020 16:00 - 17:30

Due to the onging coronavirus outbreak, many of our seminars and public events this year will continue as online seminars. Please check our website listings and Twitter feed @STICERD_LSE for updates.


About this event

This paper describes a new approach to measuring the costs of environmental regulation, which we use to study the efficiency of the U.S. Clean Air Act. We exploit regulations that force new or expanding plants to pay incumbents in the same or neighboring counties to reduce their pollution emissions. These “offset” regulations create hundreds of decentralized local markets for pollution. We use transaction-level data on numerous bilateral pollution offset contracts over the last 30 years to compare these marginal compliance costs against leading estimates of the marginal benefits of pollution reductions. While economic efficiency requires equating the marginal compliance costs and the marginal social benefits of pollution reductions, we find substantial heterogeneity in benefit-cost ratios that we analyze in detail. Regulation has rapidly become more stringent, as mean marginal compliance costs increase in real terms by 5 to 6 percent annually. Guided by these estimates, we carefully discuss policy reforms that could increase social welfare.

Applications (Applied Micro) Seminars are held on Mondays in term time at 12:00-13:30 ONLINE, unless specified otherwise.

Seminar organiser: Michael Callen

For further information please contact Lubala Chibwe, either by email: l.chibwe@lse.ac.uk.

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