Costs Of Environmental Regulation Research Articles

Analysis of Industrial Transfer Mechanism Based on Environmental Regulation

Based on outcomes of existing researches, This paper discussed capital mobility in condition of monopolistic competition and transaction costs which be decided by cost of environmental regulation, also analyzed new economic geography model of industrial transfer. After derivation and analysis of model, we find that in short term, industrial transfer of different regions is related to transaction costs due to environmental regulations, which means lower transaction costs and higher trade freedom can promote industrial transfer; While in long term, equilibrium point of industrial transfer changes with change of different initial endowment of capital and labor of two regions.

The Costs of Environmental Regulation in a Concentrated Industry

The typical cost analysis of an environmental regulation consists of an engineering estimate of the compliance costs. In industries where fixed costs are an important determinant of market structure this static analysis ignores the dynamic eects of the regulation on entry, investment, and market power. I evaluate the welfare costs of the 1990 Amendments to the Clean Air Act on the US Portland cement industry, accounting for these eects through a dynamic model of oligopoly in the tradition of Ericson and Pakes (1995). Using a recently developed two-step estimator, I recover the entire cost structure of the industry, including the distribution of sunk entry costs and adjustment costs of investment. I find that the Amendments have significantly increased the sunk cost of entry. I solve for the Markov perfect Nash equilibrium (MPNE) of the model and simulate the welfare eects of the Amendments. A static analysis misses the welfare penalty on consumers, and may even obtain the wrong sign of the welfare eects on incumbent firms.

The $1.75 Trillion Lie

A 2010 study commissioned by the Office of Advocacy of the U.S. Small Business Administration claims that federal regulations impose annual economic costs of $1.75 trillion. This estimate has been widely circulated, in everything from op-ed pages to Congressional testimony. But the estimate is not credible. For costs of economic regulations, the estimate reflects a calculation that rests on a misunderstanding of the definition of the relevant data, flunks an elementary question on the normal distribution, pads the analysis with several years of near-identical data, and fails to recognize the difference between correlation and causation. For costs of environmental regulation, the bulk of the estimate relies on decades-old studies of decades-old rules, suggesting that voluntary unemployment is the real culprit in today’s regulatory environment. The remainder of it is filled with nonexistent rules and other phantoms—as is the flawed estimate of the costs of workplace safety and health rules. It would be bad enough if this were a private study, undertaken with private funds. Even then, the viral spread of the utterly unfounded $1.75 trillion estimate would be worrying enough. But this is a study requested, funded, reviewed, and edited by a government agency, the Small Business Administration’s Office of Advocacy. The Office of Advocacy’s sponsorship and official embrace of the study—including defense of the study in testimony before Congress even after it had been severely criticized—embroils this public agency in an unwholesome blend of ineptitude and bias. The Office of Advocacy should acknowledge the study’s many failings and publicly disavow it.

The Effects of Environmental Regulation on the Competitiveness of U.S. Manufacturing

The economic costs of environmental regulations have been widely debated since the U.S. began to restrict pollution emissions more than four decades ago. Using detailed production data from nearly 1.2 million plant observations drawn from the 1972-1993 Annual Survey of Manufactures, we estimate the effects of air quality regulations on manufacturing plants' total factor productivity (TFP) levels. We find that among surviving polluting plants, stricter air quality regulations are associated with a roughly 2.6 percent decline in TFP. The regulations governing ozone have particularly large negative effects on productivity, though effects are also evident among particulates and sulfur dioxide emitters. Carbon monoxide regulations, on the other hand, appear to increase measured TFP, especially among refineries. The application of corrections for the confounding of price increases and output declines and sample selection on survival produce a 4.8 percent estimated decline in TFP for polluting plants in regulated areas. This corresponds to an annual economic cost from the regulation of manufacturing plants of roughly $21 billion, about 8.8 percent of manufacturing sector profits in this period.

Workplace Health Protection and Promotion

Traditionally, health protection and health promotion activities have operated independently of each other in the workplace. Health protection has usually been viewed as encompassing the activities that protect workers from occupational injury and illness ranging from basic safety training to the us

A California Effect for International Environmental Externalities?

An influential conventional wisdom holds that globalization could induce upward convergence in environmental regulations. Wealthy countries impose environmental regulations that prompt exporters in other countries to adopt sustainable production techniques, so the cost of environmental regulation in these countries decreases. However, previous research has only examined this California Effect for environmental regulations to address domestic externalities. I formally investigate the case of international externalities, such as global warming or ozone depletion. I find that a country can exercise leadership by enacting environmental regulations to strategically induce other countries to regulate in the future, but only if the incentive to free ride is not too strong. Surprisingly, under deep economic integration, environmental regulations are strategic complements with positive spillovers, so that international coordination is necessary to capitalize on the California Effect. In addition to showing that the California Effect is a powerful instrument of environmental statecraft, the results suggest new reasons why liberal trade and investment policies might improve environmental protection. They can also inform a strategy to promote efforts to mitigate global warming.

The Public Health Aspects of Environmental Enforcement

Beyond being an environmental concern, pollution is a public health problem. As a result, enforcement of anti-pollution statutes, such as the Clean Air Act and the Clean Water Act, not only protects the environment, but also furthers fundamental public health goals. Moreover, public health benefits provide politically salient arguments for continuing and even strengthening environmental protection that can counteract any political opposition that can arise as a result of the costs of environmental regulation and compliance to regulated entities and the taxpayers.Thus, it is worth examining the extent to which the Environmental Protection Agency (“EPA”) considers the public health in its environmental enforcement priorities and decisions. Focusing on the Clean Air Act and the Clean Water Act, this Article undertakes such an examination by: (1) outlining the statutory connections between public health considerations and environmental regulation; (2) examining the EPA’s enforcement priorities and guidance; and (3) criticizing the EPA’s presentation of its own enforcement effectiveness over the last decade.This Article concludes that public health considerations do play a significant role in environmental enforcement policies and decisionmaking. However, the EPA’s commitment to presenting the public health benefits of its enforcement actions has varied considerably over the last decade. With the release of its FY2009 enforcement assessment, however, the EPA has both expanded its analysis of the connection between environmental pollution enforcement and public health benefits and created new tools to enhance the transparency of these benefits to the affected public.

Understanding the costs of environmental regulation in Europe

Contents:PrefacePART I: RATIONALE AND OVERVIEW1. Introduction Paul Ekins, Michael MacLeod and Dominic Moran2. The Origins and Appraisal of Regulation Michael MacLeod, Dominic Moran, Salman Hussain and Kev Bevan3. Evidence on Regulatory Cost Estimates and Reasons for Ex Ante/Ex Post Variation Michael MacLeod and Dominic MoranPART II: CASE STUDIESAir Quality and Energy 4a. Assessment of the Air Quality Strategy for the UK: Road Transport Sector Winston Harrington and Richard D. Morgenstern4b. Assessment of the Air Quality Strategy for the UK: Electricity Generating Sector Richard D. Morgenstern and Winston Harrington5. The Cost of Complying with EU Vehicle Emission and Fuel StandardsRobin Vanner and Jochem Jantzen6. The Large Combustion Plants Directive Cecile Des Abbayes and Robin Vanner Industrial Processes and Products7. The Control of Major Accident Hazards (COMAH) Regulations 1999 (UK) Manuel Lago8. Ex Post Estimates of Costs to Businesses in the Context of BAT and IPPC (EU) Peter Vercaemst, Erika Meynaerts, Diane Huybrechts and Robin Vanner9. The Cost of Reducing Ozone Depleting Substances in the EU Robin VannerFood and Agriculture10. Compliance Costs of Nitrates Reduction Policies in Denmark and the Netherlands Onno Kuik and Robin Vanner11. The Groundwater Regulations, 1998 (UK) Michael MacLeod12. The Welfare of Farmed Animal (England) (Amendment) Regulations 2003Michael MacLeod13. The Food Safety (General Food Hygiene) (Butchers' Shops) Amendment Regulations 2000 (UK) Michael MacLeodPART III: SYNTHESIS AND CONCLUSIONS14. Assessing Innovation Dynamics Induced by Environmental PolicyPaul Ekins and Andrew Venn15. Conclusions and Recommendations Paul Ekins and Michael MacLeodIndex

Environmental Taxation and Induced Structural Change in an Open Economy: The Role of Market Structure

Abstract Studies of structural change induced by environmental taxation usually proceed in a perfect-competition framework and typically find structural change to be quite moderate under realistic emission reduction scenarios. By observing that some of the industries affected are likely to operate under imperfect rather than perfect competition, additional mechanisms emerge which may amplify structural change beyond the extent identified as yet. Especially, changes in economies of scale may arise which weaken or strengthen the competitive position of industries over and above the initial cost effect. Using a computable general equilibrium model for Germany to examine the effects of a unilaterally introduced carbon tax, we find that induced structural change is more pronounced under imperfect competition than under perfect competition. At the macroeconomic level, we find that aggregate losses in economies of scale are larger than aggregate gains, implying that the total costs of environmental regulation are higher under imperfect competition than under perfect competition.

What does Europe pay for clean energy?—Review of macroeconomic simulation studies

This paper analyses the macroeconomic costs of environmental regulation in European energy markets on the basis of existing macroeconomic simulation studies. The analysis comprises the European emssions trading scheme, energy taxes, measures in the transport sector and the promotion of renewable energy sources. We find that these instruments affect the European economy, in particular the energy-intensive industries and the industries that produce internationally tradeable goods. From a macroeconomic point of view, however, the costs of environmental regulation appear to be modest. The underlying environmental targets and the efficient design of regulation are key determinants for the cost burden.

Environmental quality and the cost of environmental regulation: a comparison of Scotland with the international community

AbstractIn today's global economy, assessing costs of compliance is crucial to understand how environmental regulations influence firms' behaviour and in particular their ability to compete at an international level. A three step methodology is used to conduct a comparison of Scotland's industry with the international community. The first step compares environmental protection expenditures among the European Community. The second step uses the Environmental Regulatory Regime Index developed by Porter and Esty to compare regulatory quality among 71 nations. The final step compares Scotland's environmental quality with the international community based on three criteria: SO2, PM10 and energy efficiency. Relative to the countries used in this research, Scotland is found to have a high quality regulatory regime, low costs of compliance for industry and a mixture of moderate to high environmental quality. Because significant deficiencies exist in the data, some uncertainties remain in the results. Published in 2007 with the permission of the Controller of Her Majesty's Stationery Office and the Queen's Printer for Scotland.

Money or Nothing: The Adverse Environmental Consequences of Uncompensated Land-Use Controls

The conventional wisdom holds that requiring compensation for environmental land-use controls would severely limit environmental protection efforts. There are increasing reasons to question this assumption. Both economic theory and recent empirical research demonstrate that failing to compensate private landowners for the costs of environmental regulations discourages voluntary conservation efforts and can encourage the destruction of environmental resources. The lack of a compensation requirement also means that land-use regulation is underpriced as compared to other environmental protection measures for which government agencies must pay. This results in the overconsumption of land-use regulations relative to other environmental protection measures that could be more cost-effective at advancing conservation goals. While any specific compensation proposal would present implementation questions, there are reasons to believe that a compensation requirement could improve environmental conservation efforts.

Do Environmental Regulations Cost Jobs? An Industry-Level Analysis of the UK

Abstract This paper revisits the 'jobs versus the environment' debate and provides the first analysis for a country other than the US. We firstly examine the impact of environmental regulations on employment assuming such regulations are exogenous. However, for the first time in a study of this nature, we then allow environmental regulation costs and employment to be endogenously determined. Environmental regulation costs are not found to have a statistically significant effect on employment whether such costs are treated as being exogenous or endogenous. We therefore find no evidence of a trade-off between jobs and the environment.

What Does Europe Pay for Clean Energy? Review of Macroeconomic Simulation Studies

This paper analyses the macroeconomic costs of environmental regulation in European energy markets on the basis of existing macroeconomic simulation studies. The analysis comprises the European emission trading scheme, energy taxes, measures in the transport sector, and the promotion of renewable energy sources. We find that these instruments affect the European economy, in particular the energy intensive industries and the industries that produce internationally tradeable goods. From a macroeconomic point of view, however, the costs of environmental regulation appear to be modest. The underlying environmental targets and the efficient design of regulation are key determinants for the cost burden.

Farmers' costs of environmental regulation: Reducing the consumption of nitrogen in citrus farming

Environmental externalities in agriculture, and the choice of suitable instruments to integrate environmental concerns into agricultural policies, are a matter of interest for the Common Agricultural Policy. In this paper, we use Data Envelopment Analysis techniques to assess the impact on farms' performance of two environmentally-friendly regulations aimed at abating consumption of inorganic nitrogen in Spanish citrus farming: levies on purchased nitrogen and nitrogen use permits for farms. By comparing farms' short-run maximum profits under both unregulated and regulated scenarios a regulation cost index is computed. Our results show that nitrogen overuse is mostly a matter of management inefficiency and that pollution could be reduced by promoting best farming techniques. Instead, if environmental regulations are implemented, regulating authorities should be aware that quantitative limits exercise a lower impact on farms' profits than taxes.

Empirical Estimates for Environmental Policy Making in a Second-Best Setting

This study estimates parameters necessary to calculate the optimal second-best gasoline tax, most notably the cross-price elasticity between gasoline and leisure. Prior work indicates that in a second-best setting with distortionary income taxes, both the cost of environmental regulation and the optimal environmental tax rate depend crucially on the cross-price elasticity between a polluting good and leisure. However, no prior study on second-best environmental regulation has estimated this elasticity. Using household data, we find that gasoline is a relative complement to leisure, and thus that the optimal gasoline tax is significantly higher than marginal damages the opposite of the result suggested by the prior literature. Following this approach to estimate cross-price elasticities with leisure for other major polluting goods could strongly influence estimates of optimal environmental taxes.

The Relationship between Contracting and Livestock Waste Pollution

The policy discussions about the potential linkages between contracting and livestock wasteproblems have been focused on two sets of issues. One set relates to the emergence of livestockwaste as a major environmental problem that requires urgent regulatory intervention. Implicit inthis debate is the notion that animal waste related environmental problems have been caused or exacerbatedby the organizational structure of the livestock industry, notably its high degree of verticalintegration via production contracts with independent farmers. Another set of issues relates tothe design of regulatory policies that could be implemented given the existing organizational structuresof various livestock industries. As far as the emergence of animal waste as a major environmental problem is considered, thecentral objective of this paper is to try to answer the question of whether contracting worsens livestockwaste management problems, how, and to what degree? The evidence about the potentiallinkages between contracting and animal waste management problems presented in the paper fitsinto four categories. First, contrary to the widely held belief that contracting leads to larger scaleproduction (more animals per operation) and thus larger volumes of waste per operation, the existingliterature does not support the hypothesis that the contract livestock producers tend to be largerthen the independent farmers. Second, farmers tend to apply livestock manure in excess of theamount that would require just substitution of the chemical fertilizer because by applying manureon any given field they not only receive the nutrient benefits of that application but also save on thetransportation costs relative to applying the same manure on more distant fields. This result showsthat the use of manure can be expected to worsen nutrient runoff and leaching from croplands regardlessof whether the livestock producer is a contract operator or an independent farmer. Third,contract production results in high concentration of livestock production facilities in a few geographicareas. However, there is also a tendency for the independent livestock producers to concentratein certain geographical areas due to significant agglomeration economies. Fourth, given thefact that monitoring the nutrient content of feed and manure is costly and imperfect and each partycannot observe the effort exerted by the other party, the net benefits (cost) of nutrient applicationmay fail to get incorporated into the payment schedule of a production contract. Therefore, thequestion of the division of responsibilities for providing inputs in livestock production and the resultantpayment schemes used to settle the contracts become important for purposes of optimal contractdesign. When it comes to designing an appropriate regulatory regime, the paper focuses on the questionof how to apportion the burden of regulation among the contracting parties in a socially optimalway. The conclusions can be summarized as follows. First, in light of substantial multi-taskingproblems, the regulation toward some form of a shared responsibility between the integrators andgrowers for manure disposal may render the currently used relative performance piece rate remunerationschemes obsolete. It is conceivable that rather then switching to fixed wage contracts as amethod of rewarding their growers, integrator companies may gradually change their organizationstructure towards more company owned farms. Such an important shift in the industry structureaway from contracting may have dire implications for local rural communities in many parts of thecountry. Especially strong impact could be felt in the Southeast where many small family farmsheavily depend on the supplemental income from contract poultry operations. Second, the incidenceof anticipated increases in environmental compliance cost will depend on the market power1 Department of Agricultural and Resource Economics, North Carolina State University, Raleigh, NC 27695-8109.136 The Relationship between Contracting and Livestock Waste Pollutionof the integrator on the market for growers. In markets with absolute monopsony power of the integrator,the increased cost of environmental regulation will always be borne by the integrator regardlessof the initial design. If the market for growers services is such that growers are actually earningpositive rents, then the incidence of costs depends on the distribution of bargaining power betweenparties as well as the presence of other regulatory and legal requirements governing the specificationof the contract form. Finally, the anticipated move toward shared responsibility for accidentalwaste spills between the integrator and growers may or may not be welfare enhancing, dependingon the relative bargaining power of the integrator on the market for growers. In geographical areaswhere the competition for growers is fairly fierce, making integrators liable for environmentaldamages caused by the growers may not be theoretically justifiable. On the other hand, if the integratoris the only game in town and the probability of growers defecting to another integrator islow, making integrators liable for environmental damages caused by the growers may be sociallyoptimal.

Environmental Taxation and Structural Change in an Open Economy

The economic effects of environmental taxes depend on the market structure. Under imperfect competition with free entry and exit, environmental taxes have an impact on economies of scale by changing the number and size of firms. Whether economies of scale rise or fall in a particular industry depends on induced changes in the price elasticity of demand. Because export demand is more price elastic than domestic demand, the overall price elasticity rises (falls) as the industry gains (loses) in comparative advantage. We use a computable general equilibrium model for Germany to examine the effects of a unilaterally introduced carbon tax under both perfect and imperfect competition. Our key finding is that induced structural change in favor of the less energy intensive, more labor intensive industries is more pronounced under imperfect competition than under perfect competition. At the macroeconomic level, the total costs of environmental regulation under imperfect competition can be higher or lower than those under perfect competition depending on whether aggregate gains or losses in economies of scale across imperfectly competitive sectors prevail.

Imposing Smoothness Priors in Applied Welfare Economics: An Application of the Information Contract Curve to Environmental Regulatory Analysis

Economic effects of public policy alternatives often are analyzed with simulation models. The value of simulation is enhanced when model parameters can credibly be estimated econometrically. But unrestricted estimation can be expected to result in problematic estimates, for example, estimated parameters contrary in sign to what economic theory dictates. The information contract curve (ICC), developed by Leamer, provides a flexible means to impose regularity on estimated parameters at minimum-likelihood cost. We extend the ICC methodology, using conically uniform priors, and apply it to measuring the welfare costs of environmental regulations in the U.S. pulp, paper, and paperboard industry.

Do Some Outside Directors Play a Political Role?

If outside directors with backgrounds in politics and in law play a political role, they will be more important on the boards of firms for which politics matters more. We conduct three tests. First, for a sample of manufacturing firms, we find that politically experienced directors are more prevalent in firms where sales to government, exports, and lobbying are greater; lawyer‐directors are more prevalent in firms where costs of environmental regulation are higher; and both are more prevalent in larger firms. Second, for a sample of electric utilities during the 1990s, when the advent of retail competition made politics more important, we find increased incidence of politically experienced directors. Finally, we explore whether a governmental taste for diversity creates a political role for women directors. Although we document increased incidence of women directors over time, we find little evidence that women directors play a political role.