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The Impact of Industrial Opt-Out from Utility Sponsored Energy Efficiency Programs
October 2023
Working Paper Number:
CES-23-52
Industry accounts for one-third of energy consumption in the US. Studies suggest that energy efficiency opportunities represent a potential energy resource for regulated utilities and have resulted in rate of return regulated demand-side management (DSM) and energy efficiency (EE) programs. However, many large customers are allowed to self-direct or opt-out. In the Carolinas (NC and SC), over half of industrial and large commercial customers have selected to opt out. Although these customers claim they invest in EE improvements when it is economic and cost-effective to do so, there is no mechanism to validate whether they actually achieved energy savings. This project examines the industrial energy efficiency between the program participants and non participants in the Carolinas by utilizing the non-public Census of Manufacturing data and the public list of firms that have chosen to opt out. We compare the relative energy efficiency between the stay-in and opt-out plants. The t-test results suggest opt-out plants are less efficient. However, the opt-out decisions are not random; large plants or plants belonging to large firms are more likely to opt out, possibly because they have more information and resources. We conduct a propensity score matching method to account for factors that could affect the opt-out decisions. We find that the opt-out plants perform at least as well or slightly better than the stay-in plants. The relative performance of the opt-out firms suggest that they may not need utility program resources to obtain similar levels of efficiency from the stay-in group.
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Is Air Pollution Regulation Too Lenient? Evidence from US Offset Markets
June 2023
Working Paper Number:
CES-23-27R
This paper describes a framework to estimate the marginal cost of air pollution regulation, then applies it to assess whether a large set of existing U.S. air pollution regulations have marginal benefits exceeding their marginal costs. The approach utilizes an important yet under-explored provision of the Clean Air Act requiring new or expanding plants to pay incumbents in the same or neighboring counties to reduce their pollution emissions. These "offset" regulations create several hundred decentralized, local markets for pollution that differ by pollutant and location. Economic theory and empirical tests suggest these market prices reveal information about the marginal cost of abatement for new or expanding firms. We compare estimates of the marginal benefit of abatement from leading air quality models to offset prices. We find that, for most regions and pollutants, the marginal benefits of pollution abatement exceed mean offset prices more than ten-fold. In at least one market, however, estimated marginal benefits are below offset prices.
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Is Affirmative Action in Employment Still Effective in the 21st Century?
November 2022
Working Paper Number:
CES-22-54
We study Executive Order 11246, an employment-based affirmative action policy tar geted at firms holding contracts with the federal government. We find this policy to be in effective in the 21st century, contrary to the positive effects found in the late 1900s (Miller, 2017). Our novel dataset combines data on federal contract acquisition and enforcement with US linked employer-employee Census data 2000'2014. We employ an event study around firms' acquiring a contract, based on Miller (2017), and find the policy had no ef fect on employment shares or on hiring, for any minority group. Next, we isolate the impact of the affirmative action plan, which is EO 11246's preeminent requirement that applies to firms with contracts over $50,000. Leveraging variation from this threshold in an event study and regression discontinuity design, we find similarly null effects. Last, we show that even randomized audits are not effective, suggesting weak enforcement. Our results highlight the importance of the recent budget increase for the enforcement agency, as well as recent policies enacted to improve compliance
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How Does State-Level Carbon Pricing in the United States Affect Industrial Competitiveness?
June 2020
Working Paper Number:
CES-20-21
Pricing carbon emissions from an individual jurisdiction may harm the competitiveness of local firms, causing the leakage of emissions and economic activity to other regions. Past research concentrates on national carbon prices, but the impacts of subnational carbon prices could be more severe due to the openness of regional economies. We specify a flexible model to capture competition between a plant in a state with electric sector carbon pricing and plants in other states or countries without such pricing. Treating energy prices as a proxy for carbon prices, we estimate model parameters using confidential plant-level Census data, 1982'2011. We simulate the effects on manufacturing output and employment of carbon prices covering the Regional Greenhouse Gas Initiative (RGGI) in the Northeast and Mid-Atlantic regions. A carbon price of $10 per metric ton on electricity output reduces employment in the regulated region by 2.7 percent, and raises employment in nearby states by 0.8 percent, although these estimates do not account for revenue recycling in the RGGI region that could mitigate these employment changes. The effects on output are broadly similar. National employment falls just 0.1 percent, suggesting that domestic plants in other states as opposed to foreign facilities are the principal winners from state or regional carbon pricing.
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Do Institutions Determine Economic Geography?
Evidence from the Concentration of Foreign Suppliers
February 2019
Working Paper Number:
CES-19-05
Do institutions shape the geographic concentration of industrial activity? We explore this question in an international trade setting by examining the relationship between country-level institutions and patterns of spatial concentration of global sourcing. A priori, weak institutions could be associated with either dispersed or concentrated sourcing. We exploit location and transaction data on imports by U.S. firms and adapt the Ellison and Glaeser (1997) index to construct a product-country-specific measure of supplier concentration for U.S. importers. Results show that U.S. importers source in a more spatially concentrated manner from countries with weaker contract enforcement. We find support for the idea that, where formal contract enforcement is weak, local supplier networks compensate by sharing information to facilitate matching and transactions.
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Regulating Mismeasured Pollution: Implications of Firm Heterogeneity for Environmental Policy
August 2018
Working Paper Number:
CES-18-03R
This paper provides the first estimates of within-industry heterogeneity in energy and CO2 productivity for the entire U.S. manufacturing sector. We measure energy and CO2 productivity as output per dollar energy input or per ton CO2 emitted. Three findings emerge. First, within narrowly defined industries, heterogeneity in energy and CO2 productivity across plants is enormous. Second, heterogeneity in energy and CO2 productivity exceeds heterogeneity in most other productivity measures, like labor or total factor productivity. Third, heterogeneity in energy and CO2 productivity has important implications for environmental policies targeting industries rather than plants, including technology standards and carbon border adjustments.
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The Impact of Heterogeneous NOx Regulations on Distributed Electricity Generation in U.S. Manufacturing
April 2015
Working Paper Number:
CES-15-12
The US EPA's command-and-control NOx policies of the early 1990s are associated with a 3.1 percentage point reduction in the likelihood of manufacturing plants vertically integrating the electricity generation process. During the same period California adopted a cap-and-trade program for NOx emissions that resulted in no significant impact on distributed electricity generation in manufacturing. These results suggest that traditional command-and-control approaches to air pollution may exacerbate other market failures such as the energy efficiency gap, because distributed generation is generally recognized as a more energy efficient means of producing electricity
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Why is Pollution from U.S. Manufacturing Declining?
The Roles of Environmental Regulation, Productivity, and Trade
January 2015
Working Paper Number:
CES-15-03R
Between 1990 and 2008, air pollution emissions from U.S. manufacturing fell by 60 percent despite a substantial increase in manufacturing output. We show that these emissions reductions are primarily driven by within-product changes in emissions intensity rather than changes in output or in the composition of products produced. We then develop and estimate a quantitative model linking trade with the environment to better understand the economic forces driving these changes. Our estimates suggest that the implicit pollution tax that manufacturers face doubled between 1990 and 2008. These changes in environmental regulation, rather than changes in productivity and trade, account for most of the emissions reductions.
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Do EPA Regulations Affect Labor Demand? Evidence From the Pulp and Paper Industry
August 2013
Working Paper Number:
CES-13-39
The popular belief is that environmental regulation must reduce employment, since suchregulations are expected to increase production costs, which would raise prices and thus reducedemand for output, at least in a competitive market. Although this effect might seem obvious, a careful microeconomic analysis shows that it is not guaranteed. Even if environmental regulation reduces output in the regulated industry, abating pollution could require additional labor (e.g. to monitor the abatement capital and meet EPA reporting requirements). It is also possible for pollution abatement technologies to be labor enhancing. In this paper we analyze how a particular EPA regulation, the so-called 'Cluster Rule' (CR) imposed on the pulp and paper industry in 2001, affected employment in that sector. Using establishment level data from the Census of Manufacturers and Annual Survey of Manufacturers at the U.S. Census Bureau from 1992-2007 we find evidence of small employment declines (on the order of 3%-7%), which are sometimes statistically significant, at a subset of the plants covered by the CR.
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ENVIRONMENTAL REGULATION AND INDUSTRY EMPLOYMENT: A REASSESSMENT
July 2013
Working Paper Number:
CES-13-36
This paper examines the impact of environmental regulation on industry employment, using a structural model based on data from the Census Bureau's Pollution Abatement Costs and Expenditures Survey. This model was developed in an earlier paper (Morgenstern, Pizer, and Shih (2002) - MPS). We extend MPS by examining additional industries and additional years. We find widely varying estimates across industries, including many implausibly large positive employment effects. We explore several possible explanations for these results, without reaching a satisfactory conclusion. Our results call into question the frequent use of the average impacts estimated by MPS as a basis for calculating the quantitative impacts of new environmental regulations on employment.
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