Are emission performance standards effective in pollution control? : evidence from the EU's large combustion plant directive

This paper explores the extent to which emissions limits on stack concentrations under the Large Combustion Plant (LCP) Directive succeeded in mitigating local air pollutants from thermal power stations in the European Union. We take advantage of the discontinuities in regulation status to show that the emission performance standards led to sizeable declines in concentrations of SO2, NOx, and particulate matter from the oldest fleet of combustion plants. We also find that the average response from the existing old plants was stronger than that from the relatively new existing fleet. Taking into account that new plants were not myopic in complying to the standards, we estimate the treatment effect close to the regulation discontinuity date - showing that more stringent performance standards were effective. Finally, those that opted-out were not more likely to retire than similar combustion plants that chose to comply with standards - some evidence of grandfathering-induced shutdown delays.