Working Paper: NBER ID: w14504
Authors: Meredith Fowlie; Christopher R. Knittel; Catherine Wolfram
Abstract: For political and practical reasons, environmental regulations sometimes treat point source polluters, such as power plants, differently from mobile source polluters, such as vehicles. This paper measures the extent of this regulatory asymmetry in the case of nitrogen oxides (NOx), the criteria air pollutant that has proven to be the most recalcitrant in the United States. We find significant differences in marginal abatement costs across source types with the marginal cost of reducing NOx from cars less than half of the marginal cost of reducing NOx from power plants. Our findings have important implications for the efficiency of NOx emissions reductions and, more broadly, the benefits from increasing the sectoral scope of environmental regulation. We estimate that the costs of achieving the desired emissions reductions could have been reduced by nearly $2 billion, or 9 percent of program costs, had marginal abatement costs been equated across source types.
Keywords: NOx emissions; environmental regulation; marginal abatement costs; pollution sources
JEL Codes: Q52; Q58
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Marginal cost of reducing NOx from cars (Q52) | Marginal cost of reducing NOx from power plants (Q52) |
| Equating marginal abatement costs across source types (Q52) | Reduced costs of achieving desired emissions reductions (Q52) |
| Symmetric regulatory treatment (G18) | Efficiency gains larger than past estimates (D61) |
| Equalizing marginal abatement costs across sectors (D61) | Minimized overall compliance costs (D61) |