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When do Firms Go Green? Comparing Command and Control Regulations with Price Incentives in India / Ann Harrison, Benjamin Hyman, Leslie Martin, Shanthi Nataraj.
- Format:
- Book
- Author/Creator:
- Harrison, Ann.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w21763.
- NBER working paper series no. w21763
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2015.
- Summary:
- There are two commonly accepted views about command-and-control (CAC) environmental regulation. First, CAC delivers environmental outcomes at very high cost. Second, in a developing country with weak regulatory institutions, CACs may not even yield environmental benefits: regulators can force firms to install pollution abatement equipment, but cannot ensure that they use it. We examine India's experience and find evidence that CAC policies achieved substantial environmental benefits at a relatively low cost. Constructing an establishment-level panel from 1998 to 2009, we find that the CAC regulations imposed by India's Supreme Court on 17 cities improved air quality with little effect on establishment productivity. We document a strong effect of deterred entry of high-polluting industries into regulated cities; however little effect on the overall level of manufacturing output, employment, or productivity in those cities. We also find sustained reductions in within-establishment coal use, with no evidence of leakage into other fuels. To benchmark our results, we use variation in coal prices to compare the CAC policies to price incentives. We show that CAC regulations were primarily effective at reducing coal consumption of large urban polluters, while a coal tax is likely to have a broader impact across all establishment types. Our estimated coal price elasticity suggests that a 15-30% excise tax would be needed to generate reductions in coal consumption equivalent to those produced by these CAC policies.
- Notes:
- Print version record
- November 2015.
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