Effects of Vintage-Differentiated Environmental Regulation

Abstract

Vintage-differentiated regulations (VDRs) are standards that are fixed with respect to the date of entry of regulated units, with later vintages facing more stringent standards.  VDRs play prominent roles under major Federal, state, and local environmental laws.  This paper synthesizes what is known about the effects of environmental VDRs, and develops lessons for public policy and for research.  Economic theory suggests that such age-discriminatory regulations retard turnover of the capital stock, drive up the costs of environmental protection, and can increase pollution levels.  Empirical studies validate theoretical predictions that VDRs delay replacement of durable goods, and thereby increase aggregate pollution abatement costs.  In some cases, empirical studies also validate the perverse consequence that environmental progress is itself retarded.