Impacts of the Clean Air Act on the Power Sector from 1938-1994: Anticipation and Adaptation
In this study, we digitize data on virtually every fossil-fuel power plant in the United States from 1938-1994 to provide the first assessment of the impacts of the 1970 Clean Air Act (CAA) that accounts for anticipation. The extended pre-regulation benchmark allows us to account for anticipatory behavior by electric utilities in the years leading up to the Act's passage. Guided by predictions from a simple theoretical framework, we use a difference-in-differences approach to examine the impacts of the Act's nonattainment designations on coal-fired power plants of different vintages. We find that nonattainment designation led to large and persistent decreases in plant productivity, which would be substantially underestimated without data from well before the passage of the 1970 CAA. Nonattainment-induced productivity losses were concentrated only among plants built before 1963. This timing aligns with the passage of the original 1963 CAA, which resulted in minimal regulatory enforcement but served as a signal of impending federal regulation. We provide empirical and historical evidence of anticipatory responses by utilities in the design and siting of plants built after 1963. Finally, we show that the aggregate productivity losses of the CAA borne by the power sector were substantially mitigated by the reallocation of output away from older less productive power plants.
Non-Technical Summaries
- Well before the legislation was passed, the industry began revamping plans for new construction and developing innovative abatement...
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