Gasoline Content Regulation and Compliance Behavior among US Refineries

The refining industry in the US is a leading producer of sulfur dioxide and nitrogen oxide emissions. As a result of the Clean Air Act, it has been subject to a host of environmental regulations that prescribes the production processes firms can employ and limits their emissions based on the permits they hold. On the other hand, in some regions, refiners have been forced to produce higher quality gasoline to meet local, state and federal air quality standards. Empirical evidence suggests that a much larger proportion of firms in the industry have been non-compliant with Clean Air Act statutes than in other industries. In this paper we examine the effect of gasoline content regulation on compliance behavior of refineries. We find that in areas where gasoline content regulation was implemented, there was increased compliance on the part of firms.