The Impacts of Alternative Policy Instruments on Environmental Performance: A Firm Level Study of Temporary and Persistent Effects

Abstract

Using a rich Norwegian panel data set that includes information about environmental regulations such as environmental taxes, non-tradable emission quotas and technology standards, all kinds of polluting emissions, and a large number of control variables, we analyze the effects of direct and indirect environmental regulations on environmental performance. We identify positive and significant effects of both direct and indirect policy instruments. Moreover, we test whether the two types of regulations lead to positive and persistent effects on environmental performance. We find evidence that direct regulations promote such effects. Indirect regulations, on the other hand, will only have potential persistent effects if environmental taxes are increasing over time.