The Effect of Environmental Regulation on Power Sector Employment: Phase I of the Title IV SO2 Trading Program

We use panel data on fossil fuel fired power plants to examine the impact of Phase I of the Title IV SO2 trading program on electric utility employment. We find little evidence that power plants had significant decreases in employment during Phase I relative to non–Phase I power plants. This finding holds whether we assume a plant- or utility-level decision model of compliance. When we disaggregate by year, we find that employment is significantly lower only in Phase I plants relative to non–Phase I plants in the first year of compliance but not in subsequent years. However, even this effect is not statistically significant at the utility level. Furthermore, we find little evidence of a significant employment effect for subsets of plants or utilities that pursue particular compliance strategies. Controlling for an NOx rate-based standard that partially overlaps with the SO2 trading program does not change our findings.