Polluting Public Funds: The Effect of Environmental Regulations on Municipal Bonds

References

• Ardia D, Bluteau K, Boudt K, Inghelbrecht K (2023) Climate change concerns and the performance of green vs. brown stocks. Management Sci. 69(12):7607–7623.Link, Google Scholar
• Auh JK, Choi J, Deryugina T, Park T (2022) Natural disasters and municipal bonds. NBER Working Paper No. 30280, National Bureau of Economic Research, Cambridge, MA.Google Scholar
• Babina T, Jotikasthira C, Lundblad C, Ramadorai T (2021) Heterogeneous taxes and limited risk sharing: Evidence from municipal bonds. Rev. Financial Stud. 34(1):509–568.Crossref, Google Scholar
• Baker M, Bergstresser D, Serafeim G, Wurgler J (2022) The pricing and ownership of US green bonds. Ann. Rev. Financial Econom. 14:415–437.Crossref, Google Scholar
• Bakkensen LA, Barrage L (2022) Going underwater? Flood risk belief heterogeneity and coastal home price dynamics. Rev. Financial Stud. 35(8):3666–3709.Crossref, Google Scholar
• Baldauf M, Garlappi L, Yannelis C (2020) Does climate change affect real estate prices? Only if you believe in it. Rev. Financial Stud. 33(3):1256–1295.Crossref, Google Scholar
• Barrage L, Furst J (2019) Housing investment, sea level rise, and climate change beliefs. Econom. Lett. 177:105–108.Crossref, Google Scholar
• Bartik TJ (1985) Business location decisions in the United States: Estimates of the effects of unionization, taxes, and other characteristics of states. J. Bus. Econom. Statist. 3(1):14–22.Crossref, Google Scholar
• Bayer P, Keohane N, Timmins C (2009) Migration and hedonic valuation: The case of air quality. J. Environment. Econom. Management 58(1):1–14.Crossref, Google Scholar
• Bolton P, Kacperczyk M (2021) Do investors care about carbon risks? J. Financial Econom. 142(2):517–549.Crossref, Google Scholar
• Chay KY, Greenstone M (2005) Does air quality matter? Evidence from the housing market. J. Political Econom. 113(2):376–424.Crossref, Google Scholar
• Choi S, Levine R, Park RJ, Xu S (2022) Environmental Regulation, Pollution, and Shareholder Wealth (University of California, Berkeley).Google Scholar
• Clay K, Jha A, Lewis JA, Severnini ER (2021) Impacts of the clean air act on the power sector from 1938–1994: Anticipation and adaptation. NBER Working Paper No. 28962, National Bureau of Economic Research, Cambridge, MA.Google Scholar
• Cropper ML, Hu M, Park Y, Muller NZ (2025) Geographic resolution in environmental policy: EPA’s shift from regions to counties under the clean air act. NBER Working Paper No. 33412, National Bureau of Economic Research, Cambridge, MA.Google Scholar
• CRS (2015) Transportation Conformity Under the Clean Air Act. Congressional Research Service, Washington, DC.Google Scholar
• CUSIP (2024) CUSIPCINS_db Master File version 16. https://www.cusip.com/cusip/cusipProductDocument.htm.Google Scholar
• Driessen GA (2018) Tax-Exempt Bonds: A Description of State and Local Government Debt. Congressional Research Service, Washington, DC.Google Scholar
• Eckbo BE (2008) Handbook of Empirical Corporate Finance Set (Elsevier, Amsterdam).Google Scholar
• Flammer C (2020) Green bonds: Effectiveness and implications for public policy. Environment. Energy Policy Econom. 1(1):95–128.Crossref, Google Scholar
• Flammer C (2021) Corporate green bonds. J. Financial Econom. 142(2):499–516.Crossref, Google Scholar
• Gibson M, Mullins JT (2020) Climate risk and beliefs in New York floodplains. J. Assoc. Environment. Resources Econom. 7(6):1069–1111.Google Scholar
• Giglio S, Kelly B, Stroebel J (2021) Climate finance. Ann. Rev. Financial Econom. 13:15–36.Crossref, Google Scholar
• Goldsmith-Pinkham P, Gustafson MT, Lewis RC, Schwert M (2023) Sea-level rise exposure and municipal bond yields. Rev. Financial Stud. 36(11):4588–4635.Google Scholar
• Gray WB, Shadbegian RJ (1998) Environmental regulation, investment timing, and technology choice. J. Industry Econom. 46(2):235–256.Crossref, Google Scholar
• Gray WB, Shadbegian RJ, Wang C, Meral M (2014) Do EPA regulations affect labor demand? Evidence from the pulp and paper industry. J. Environment. Econom. Management 68(1):188–202.Crossref, Google Scholar
• Greenstone M (2002) The impacts of environmental regulations on industrial activity: Evidence from the 1970 and 1977 Clean Air Act Amendments and the census of manufacturers. J. Political Econom. 110(6):1175–1219.Crossref, Google Scholar
• Henderson J (1996) Effects of air quality regulation. Amer. Econom. Rev. 86(4):789–813.Google Scholar
• Ilhan E, Sautner Z, Vilkov G (2020) Carbon tail risk. Rev. Financial Stud. 34(3):1540–1571.Crossref, Google Scholar
• Jerch R, Kahn ME, Lin GC (2023) Local public finance dynamics and hurricane shocks. J. Urban Econom. 134:103516.Crossref, Google Scholar
• Krueger P, Sautner Z, Starks LT (2020) The importance of climate risks for institutional investors. Rev. Financial Stud. 33(3):1067–1111.Crossref, Google Scholar
• Levinsohn J, Petrin A (2003) Estimating production functions using inputs to control for unobservables. Rev. Econom. Stud. 70(2):317–341.Crossref, Google Scholar
• Levinson ARIK (1996) Environmental regulations and manufacturers’ location choices: Evidence from the Census of Manufactures. J. Public Econom. 62(1–2):5–29.Crossref, Google Scholar
• List JA, Millimet DL, Fredriksson PG, McHone WW (2003) Effects of environmental regulations on manufacturing plant births: Evidence from a propensity score matching estimator. Rev. Econom. Statist. 85(4):944–952.Crossref, Google Scholar
• MacKinlay AC (1997) Event studies in economics and finance. J. Econom. Literature 35(1):13–39.Google Scholar
• Markowitz H (1952) Portfolio selection. J. Finance 7(1):77–91.Google Scholar
• McConnell VD, Schwab RM (1990) The impact of environmental regulation on industry location. Land Econom. 66(1):67.Crossref, Google Scholar
• MSRB (2017) Municipal securities: Financing the nation’s infrastructure. Municipal Securities Rulemaking Board, Washington, DC. Accessed September 16, 2025, https://www.msrb.org/sites/default/files/MSRB-Infrastructure-Primer.pdf.Google Scholar
• Muller NZ, Mendelsohn R, Nordhaus W (2011) Environmental accounting for pollution in the United States economy. Amer. Econom. Rev. 101(5):1649–1675.Crossref, Google Scholar
• Painter M (2020) An inconvenient cost: The effects of climate change on municipal bonds. J. Financial Econom. 135(2):468–482.Crossref, Google Scholar
• Robertson A, Spiegel MI (2017) Better bond indices and liquidity gaming the rest. Preprint, submitted November 15, 2017, https://dx.doi.org/10.2139/ssrn.3059824.Google Scholar
• Seltzer L, Starks LT, Zhu Q (2024) Climate regulatory risks and corporate bonds. Report 1014, Federal Reserve Bank of New York, New York.Google Scholar
• Shadbegian RJ, Gray WB (2005) Pollution abatement expenditures and plant-level productivity: A production function approach. Ecological Econom. 54(2–3):196–208.Crossref, Google Scholar
• Sharpe WF (1994) The Sharpe ratio. J. Portfolio Management 21(1):49–58.Crossref, Google Scholar
• Tax Policy Center (2020) Briefing book: A citizen’s guide to the fascinating (and confusing) world of federal taxes. Urban Institute & Brookings Institution. Accessed September 16, 2025, https://www.taxpolicycenter.org/sites/default/files/briefing-book/tpc_briefing_book_2020.pdf.Google Scholar
• USEPA (1999) The benefits and costs of the Clean Air Act: 1990 to 2010. Report EPA-410-R99-001, U.S. Environmental Protection Agency, Office of Air and Radiation, Washington, DC.Google Scholar
• USEPA (2010) The benefits and costs of the Clean Air Act: 1990 to 2010: EPA report to Congress. Report, U.S. Environmental Protection Agency, Office of Air and Radiation, Washington, DC.Google Scholar
• USEPA (2016) Air quality design values. https://19january2017snapshot.epa.gov/air-trends/air-quality-design-values_.html.Google Scholar
• USEPA (2018) AQS data mart. https://aqs.epa.gov/aqsweb/documents/data_mart_welcome.html.Google Scholar
• USEPA (2025) USEPA green book. https://www.epa.gov/green-book.Google Scholar
• Walker WR (2013) The transitional costs of sectoral reallocation: Evidence from the Clean Air Act and the workforce. Quart. J. Econom. 128:1787–1835.Crossref, Google Scholar
• Zou EY (2021) Unwatched pollution: The effect of intermittent monitoring on air quality. Amer. Econom. Rev. 111(7):2101–2126.Crossref, Google Scholar