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CEP/STICERD Applications Seminars

Is Air Pollution Regulation Too Stringent?

Joseph Shapiro (Berkeley)

Monday 18 May 2020 16:00 - 17:30

Many of our seminars and public events this year will continue as in person or as hybrid (online and in person) events. Please check our website listings and Twitter feed @STICERD_LSE for updates.

Unless otherwise specified, in-person seminars are open to the public.

Those unable to join the seminars in-person are welcome to participate via zoom if the event is hybrid.


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 in 3.05 in person.

Seminar organiser: Jörn-Steffen Pischke

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

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