Economics

Environmental regulation, investment timing, and technology choice

Document Type

Book Chapter

Abstract

We test whether environmental regulation affects investment decisions, using Census data for individual paper mills. New mills in states with strict environmental regulations choose cleaner production technologies, with differences in air and water pollution regulation also influencing technology choice. Examining investment allocation across existing plants, we find that abatement and productive investment tend to be scheduled together. However, plants with high abatement investment over the entire period spend significantly less on productive capital. This seems to reflect both environmental investment 'crowding out' productive investment within a plant, and firms shifting investment towards plants facing less stringent abatement requirements.

Publication Title

Economic Costs and Consequences of Environmental Regulation

Publication Date

2002

First Page

353

Last Page

374

ISBN

9781315188010

DOI

10.4324/9781315188010

Keywords

environmental regulation, economic impact, policy

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