Eric Ohrn (Monday, 3/11/2024)

Grinnell College

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“Unintended Environmental Consequences of Investment Stimulus Policy”

Time: 2:00pm-3:30pm

Location: 648 Evans Hall

*This seminar is hosted by the Dept. of Economics and meets on a different day/time

Paper co-authored with: Dana C. Andersen (University of Alberta) and E. Mark Curtis (Wake Forest University)

Abstract: We study the unintended environmental consequences of “bonus depreciation,” one of the largest investment tax incentives in US history. To do so, we pair emissions data from the EPA’s Toxic Release Inventory and National Emissions Inventory with quasi-experimental policy variation in the extent to which establishments benefited from the policy. Differences-in-differences estimates show bonus depreciation increased annual emissions by 30%. To quantify aggregate damages associated with the policy we integrate our estimates into a pollution transport model. We estimate overall environmental damages at between $17 and 39 billion per year. These estimates represent between 56 and 125% of the policy’s annual fiscal cost during the period we study. Damages differ by race and were 75% higher for African-Americans compared to the national average. More stringent environmental regulations decreased damages from bonus depreciation by 40%.