India has a multitude of environmental regulations but a history of poor enforcement.
Between 1996 and 2004, India’s Supreme Court required 17 cities to enact Action
Plans to reduce air pollution through a variety of command-and-control (CAC) environmental
regulations. We compare the impacts of these regulations with the impact
of changes in coal prices on establishment-level pollution abatement, coal consumption,
and productivity growth. We find that higher coal prices reduced coal use within
establishments, with price elasticities similar to those found in the US. In addition,
higher coal prices are associated with lower pollution emissions at the district level.
CAC regulations did not affect within-establishment pollution control investment or
coal use, but did impact the extensive margin, increasing the share of large establishments
investing in pollution control and reducing the entry of new establishments. For
reducing SO2 emissions, our results suggest that higher coal prices were more effective
in improving environmental outcomes than command and control measures.