Plant vintage, technology, and environmental regulation

Abstract

Does the impact of environmental regulation differ by plant vintage and technology? We answer this question using annual Census Bureau information on 116 pulp and paper mills' vintage, technology, productivity, and pollution abatement operating costs for 1979-1990. We find a significant negative relationship between pollution abatement costs and productivity levels. This is due almost entirely to integrated mills (those incorporating a pulping process), where a one standard deviation increase in abatement costs is predicted to reduce productivity by 5.4 percent. Older plants appear to have lower productivity but are less sensitive to abatement costs, perhaps due to 'grandfathering' of regulations. Mills which undergo renovations are also less sensitive to abatement costs, although these vintage and renovation results are not generally significant. We find similar results using a log-linear version of a three input Cobb-Douglas production function in which we include our technology, vintage, and renovation variables. Sample calculations of the impact of pollution abatement on productivity show the importance of allowing for differences based on plant technology. In a model incorporating technology interactions we estimate that total pollution abatement costs reduce productivity levels by an average of 4.7 percent across all the plants. The comparable estimate without technology interactions is 3.3 percent, approximately 30% lower.

Environmental Regulation, Government R&D Funding and Green Technology Innovation: Evidence from China Provincial Data

“…In addition, although Leeuwen et al (2013) confirmed the "weak" Porter hypothesis, it did not confirm the "strong" Porter hypothesis in their study [10]. Gray et al (2001) pointed out that regulation in the entire manufacturing industry in the United States would lead to a productivity drop of 9.3% [15]. Bezdek M. (2012) added that strict air quality regulations have contributed to a 2.6% decline in the productivity of the American aircraft manufacturing industry [16].…”

Assessing the Impact of Formal and Informal Regulations on Environmental and Economic Performance of Brazilian Manufacturing Firms

“…They find that the data are consistent with the weaker version of the Porter hypothesis. 5 Working on a sample of plants in the pulp and paper industry, Gray and Shadbegian (2003) find among others that total pollution abatement costs reduce productivity by an average 4.8% across all the plants.…”

Survol des fondements théoriques de l’hypothèse de Porter

“…également, un nombre croissant de recherches montrent que les consommateurs sont effectivement prêts à payer un peu plus pour des produits qui ont moins d'impacts sur l'environnement (voir par exemple Roe et al, 2001;Bjorner et al, 2004). Par contre, il existe beaucoup plus de recherches qui démontrent que, contrairement aux attentes de Porter, la RE a un impact négatif sur la croissance de la productivité (par exemple gollop et Robert, 1983;dufour, Lanoie et Patry, 1998;gray et Shadbegian, 2003). L'impact peut être assez important pour les industries fortement polluantes comme par exemple l'industrie de la production d'électricité thermique 12 .…”