An Environmental Race to the Bottom? “No More Stringent” Laws in the American States

Abstract Many American states have adopted laws designed to prevent environmental agencies from regulating pollution emissions more stringently than is required by federal statute. This study leverages variation in the timing and breadth of state adoption of these “No More Stringent” (NMS) laws to examine the claim that interstate competition for mobile capital leads state governments to relax regulatory standards, resulting in an environmental race to the bottom. The results indicate that the diffusion of NMS laws is driven by two forms of interstate economic competition, a policy competition effect that operates primarily among contiguous neighbors and a cost competition effect that operates primarily among a broader set of economic peers. These findings provide new empirical support for the environmental race to the bottom argument, and suggest new challenges for the use of cooperative federalism arrangements that involve state implementation of federal programs.