Abstract

This dissertation is composed of two related chapters dealing with the industrial organization aspects of environmental regulation. I first examine the problem of how to measure the full economic costs of a regulation in the presence of market power, and then extend this analysis to evaluate the welfare implications of a pollution permits control regime. The first chapter evaluates the welfare costs of the 1990 Amendments to the Clean Air Act on the US Portland cement industry. The typical cost analysis of an environmental regulation consists of an engineering estimate of the compliance costs. In industries where fixed costs are an important determinant of market structure this static analysis ignores the dynamic effects of the regulation on entry, investment, and market power. I evaluate the welfare effects of the 1990 Amendments to the Clean Air Act on the US Portland cement industry, accounting for these effects through a dynamic model of oligopoly in the tradition of Ericson and Pakes. I find that the Amendments have significantly increased the sunk cost of entry. A static

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