Essays on Firms' Responses to Environmental Regulation in the U.S. Industrial Sector

Abstract

An understanding of how industrial firms respond to different enforcement practices and the benefits of those responses, within the context of environmental regulation, is of crucial importance because it enables us to learn about policies and institutions that are welfare enhancing. The first chapter of my dissertation examines a link between the flaring of natural gas and an increase in respiratory related hospital visits within the state of North Dakota. Results indicate that if current regulatory practices to decrease flaring had been in place during my sample period of 2007 to 2015, the total number of respiratory related hospital visits by individuals who live within 30 miles of active wells would have declined by 21%. The next two chapters focus on direct responses by firms to different regulatory enforcement strategies. In the second chapter of my dissertation, I investigate the use of state-dependent enforcement policy in the context of the Clean Air Act using a natural experiment based on the actions of regulators in Florida. I find that noncompliant manufacturing plants within the state of Florida who were not classified as "Priority Violators" increased their responsiveness to regulatory warnings following an increase in the average penalties issued to plants classified as "Priority Violators." The third and final chapter examines how the use of state-dependent enforcement policy by regulators effects both air emissions and the Clean Air Act compliance rate of manufacturing firms. Using a detailed dataset of plant-level enforcement, emissions, investment, and state-level regulatory budgets, I construct a dynamic structural model of plant investment in environmental remediation for my primary empirical analysis. My main result is that both noncompliance with the Clean Air Act and industrial emissions would have increased significantly by the end of my 8-year sample period without the current policy of subjecting "Priority Violators" to a non-linear increase in regulatory scrutiny