Environmental regulation and substitution between sources of pollution: An empirical analysis of Florida's storage tanks

Stringent and very specific environmental regulations may spur behavioral responses by the regulated entities that can offset the intended pollution control goals. I empirically examine the effects of regulating underground storage tanks for petroleum products and hazardous substances, focusing on their possible substitution or complementarity with a less stringently regulated alternative, aboveground tanks. Longitudinal county-level tank data from Florida reveal that the relationship between underground and aboveground tanks changed, from one of complementarity to one of substitution, after the regulations were issued. Tank installations are affected by resident characteristics that enter in the firm's calculus of the damages from leaks.