Tools- of Changes

Emissions Disclosure Requirements Lower CO2 Output

When large power plants were required to disclose their carbon dioxide output, emissions fell by more than 7%, while at some small plants, exempt from disclosure, emissions rose at least 25%. This illustrates the Hawthorne Effect and the power of Norm Appeals.

The authors examine the real effects of the Greenhouse Gas Reporting Program (GHGRP) on electric power plants in the United States. Starting in 2010, the GHGRP requires both the reporting of greenhouse gas emissions by facilities emitting more than 25,000 metric tons of carbon dioxide per year to the Environmental Protection Agency and the public dissemination of the reported data in a comprehensive and accessible manner. Using a difference-in-difference research design, the authors find that power plants that are subject to the GHGRP reduced carbon dioxide emission rates by 7%. The effect is stronger for plants owned by publicly traded firms. We detect evidence of strategic behavior by firms that own both GHGRP plants and non-GHGRP plants. Such firms strategically reallocate production and related emissions between plants to reduce GHGRP-disclosed emissions. The authors interpret this as evidence that the program is costly to the affected firms. The results offer new evidence that public or shareholder pressure is a primary channel through which mandatory Corporate Social Responsibility (CSR) reporting programs affect firm behavior.