Author(s)

• Junsoo Lee
• John A List

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Abstract

Despite its growth in other areas of economics,time series econometric methods have not been widespread in the area of environmental and resource economics. We illustrate one use of time series methods by examining the time path of US nitrogen oxide (NOx) emission data over the period 1900-1994. The analysis highlights that proper time series methods can aid in optimal regulatory policy as well as developing empirical verification of theories put forth to explain economic phenomena. In addition, several interesting results emerge. First, we find that the emissions series contains both a permanent and random component. Second, if one attributed all of the emissions reductions to regulatory policy, intervention analysis suggests that the 1970 Clean Air Act(CAA) did not merely have transitory effects,but permanently influenced the NOx emission path. In terms of total regulatory impact, an upper bound on the emissions saved due to the 1970 CAA is in the range of 27%-48%.