Environmental Regulation, Imperfect Competition, and Market Spillovers: The Impact of the 1990 Clean Air Act Amendments on the US Oil Refining Industry
This working paper estimates the impact of Clean Air Act restrictions on refined petroleum products on refining costs, product prices, and consumer welfare.
The 1990 Clean Air Act Amendments imposed extensive restrictions on refined petroleum product markets, requiring select end users to purchase new cleaner versions of gasoline and diesel. I estimate the impact of this intervention on refining costs, product prices and consumer welfare. Isolating these effects is complicated by several challenges likely to appear in other regulatory settings, including overlap between regulated and non-regulated markets and deviations from perfect competition. Using a rich database of refinery operations, I estimate a structural model that incorporates each of these dimensions, and then use this cost structure to simulate policy counterfactuals. I find that the policies increased gasoline production costs by 7 cents per gallon and diesel costs by 3 cents per gallon on average, although these costs varied considerably across refineries. As a result of these restrictions, consumers in regulated markets experienced welfare losses on the order of $3.7 billion per year, but this welfare loss was partially offset by gains of $1.5 billion dollars per year among consumers in markets not subject to regulation. The results highlight the importance of accounting for imperfect competition and market spillovers when assessing the cost of environmental regulation.
Richard L. Sweeney
Testimony and Public Comments — Jun 1, 2023
Comments to OMB on the Proposed Revisions to Circular A-4
To the Office of Management and Budget on proposed revisions to Circular A-4.
Media Highlight — Jun 1, 2023
Washington Post: "Some Experts Are Questioning Mountain Valley Pipeline's Emissions Estimates"
RFF Fellow Daniel Raimi shares his thoughts on the Mountain Valley Pipeline's potential to leak methane in the Washington Post's climate-focused newsletter, Climate 202.
Report — May 31, 2023
Reforming Resource Adequacy Practices and Ensuring Reliability in the Clean Energy Transition
This report introduces the emerging challenges for resource adequacy planning, reform options, and insights from a February 2023 RFF workshop of subject matter experts.
Special Series: Electrifying Large Vehicles — May 31, 2023
Zero-Emission Trucks and the Inflation Reduction Act: Tax Credits for Clean Commercial Vehicles and Electric Vehicle Charging Infrastructure
The Inflation Reduction Act incentivizes the electrification of the transportation sector through tax credits, with implications for fleet purchase decisions, electricity demand, emissions, manufacturing, and government spending.