New Source Review for Stationary Sources of Air Pollution (2006) / Chapter Skim
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5 Econometric Analysis
5 Econometric Analysis
Pages 140-157
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From page 140... ...
is related to an indicator of the type of NSR rules faced by the facility (X) and to other explanatory variables (Z)
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From page 141... ...
If a firm chooses to go through NSR permitting despite having to face the stringent rules, stricter NSR requirements would generate greater emission reductions at the facility. Some firms trying to avoid NSR requirements would also reduce emissions by undertaking other pollution-control projects to avoid an increase in overall emissions or by accepting enforceable limits on facility emissions in the form of a "synthetic minor"1 designation.
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From page 142... ...
, although at this writing none of the revised SIPs has been formally approved by EPA, so at least in 2005 none of the facilities in these states has been covered by the NSR rule changes. In contrast, facilities in states without an approved NSR program are subject to NSR rules at the federal level, so changes in the NSR rules for these facilities could be implemented directly by EPA.
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From page 143... ...
To the extent that NSR rules are expected to become less strict in the next year or two, firms may postpone investments until the NSR rule changes take effect. Such postponement could lead to a bunching of investment in the first few years after the rule changes, and the short-run response of investment could be considerably larger than the long-run response.
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From page 144... ...
Depending on local air quality and state regulatory stringency, the application process for a minor permit might be about as stringent as that for an NSR permit or substantially less stringent. Massachusetts, Michigan, and Virginia indicated that their minor-permit programs require BACT in some circumstances, so the NSR rule changes might have less effect for them.
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From page 145... ...
Those states arguably prefer more stringent NSR rules, so their permit writers would be expected to be stricter in interpreting the NSR requirements. But nine states supported the EPA's legal position on the NSR rule changes, so permit writers in those states might be expected to be less stringent in their interpretations of NSR.
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From page 146... ...
As noted earlier, changes in NSR rules could encourage additional investment in new productive equipment that may be cleaner than the older equipment it replaces. It is possible that enough new, emission-reducing investments would occur that overall emissions would be reduced even if a few investment projects would be able to take advantage of the weaker NSR rules to proceed with projects that might entail increases in emissions, or at least smaller emission reductions than they would have needed under the prerevision NSR rules.
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From page 147... ...
A substantial encouragement of new investment activity (as anticipated by proponents of the NSR rule changes) would be seen in an increase in minor permits that was considerably larger than the decrease in NSR permits.
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From page 148... ...
148 NEW SOURCE REVIEW FOR STATIONARY SOURCES OF AIR POLLUTION TABLE 5-3 Permit Data by State (1997-2002) Number of NSR Permits Electricity generating Manufacturing Total Sector Sectors State Permit Data Availabilitya Implemented states AZ 26 26 0 -CA 52 31 18 Paper recordsb HI 13 13 0 Paper/document IL 195 117 78 Electronic (ORACLE, 1972+)
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From page 149... ...
that might be included in the estimations -- controlling for factors besides the change in NSR rules (X) that might affect the outcome variables (Y)
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From page 150... ...
Hence, any facility-level measure of the effects of the NSR rule changes on human health would be derived directly from changes in facility-level emissions. If emissions increased, we would expect air quality to worsen and adverse health effects to increase.
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From page 151... ...
These data allow tests for increases or decreases in the amount of air-pollution abatement investment after the NSR rules changed. Some limitations of the PACE data may affect the analysis.
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From page 152... ...
provides an overall indicator of the effect of the NSR rule changes on the efficiency of production and measure of the overall costs (or benefits) of the rule changes.3 Through the efforts of the Census Bureau's Center for Economic Studies, the ASM and CM data have been linked at the facility level in the Longitudinal Research Database, as described in McGuckin and Pascoe (1988)
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From page 153... ...
Emission data at the facility level is collected by EPA in the National Emissions Inventory (NEI)
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From page 154... ...
GAO (2003) noted EPA's lack of data for measuring the emission effects of the NSR rule changes.
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From page 155... ...
was able to calculate which of several OSHA standards were likely to have significant effects on compliance costs, given ex ante estimates of the magnitude of compliance costs for each standard. In the case of the NSR rule changes, there is a wider array of outcome variables to consider, but the fundamental nature of the statistical tests is the same: get estimates of the amount of variation in the data for a variable and then see whether the difference between the affected and unaffected plants in their average outcomes exceeds the critical amount of variation for the T test.
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From page 156... ...
Furthermore, any such analysis will be subject to measurement error because of concerns about the uncertainty of whether the rule changes will hold up to court challenge and the possibility that anticipation of the rule changes could affect the timing of investment decisions. Diversity among states in the timing and magnitude of the NSR rule changes will help researchers to get a better measurement of the effects of the changes, and this will make possible a reduced-form analysis of the effects of the changes on investment and emissions.
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From page 157... ...
Conversely, it may be possible to provide upper bounds for the effects of the NSR rule changes on investment (we might observe an average increase in investment of 2% and be able to rule out an impact greater than 20%)
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