Environmental and Resource Economics

, Volume 40, Issue 4, pp 571–591

Bush v. Gore and the Effect of New Source Review on Power Plant Emissions

Article

Abstract

New Source Review (NSR) is a Clean Air Act regulation that requires electric utilities to meet emission standards when making modifications to existing power plants. The regulation increases the cost of replacing worn out parts, and limits the firm’s scope of potential capital investments. Such restrictions may lead to greater retirements and lower utilization, adversely affecting profits. Prior to the 2000 presidential election, investors expected Bush to have a narrower interpretation of NSR than Gore. Therefore, we use changes in stock prices to estimate the effect on profits of differences in NSR policy. Our results indicate that investors expected the average boiler to be $38 million more valuable under the Bush administration. Over the boilers’ lifetimes, the additional utilization will have increased emissions by 19 million tons of sulfur dioxide, 5.9 million tons of nitrogen oxides and 980 million tons of carbon dioxide, relative to natural gas generation.

Keywords

Event window New source review Coal power plants Air pollution 

JEL Classification

L50 Q48 Q52 

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Copyright information

© Springer Science+Business Media B.V. 2007

Authors and Affiliations

  1. 1.National Center for Environmental EconomicsEnvironmental Protection AgencyWashingtonUSA
  2. 2.Department of EconomicsUniversity of Illinois at ChicagoChicagoUSA

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