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Evaluating the Impact of Environmental Policy on the Trend Behavior of U.S. Emissions of Nitrogen Oxides and Volatile Organic Compounds

Using recently developed structural break tests that are valid for difference-stationary (DS) and trend-stationary (TS) data and unit root tests that allow for breaks we examine the trend behavior of two air pollutants, Nitrogen Oxides (NOX) and Volatile Organic Compounds (VOC). In particular, we concentrate on answering two questions. First, were there breaks in the trends of NOX and VOC emissions around the same time environmental policies such as the Clean Air Act Amendments (CAAA) of 1970 were passed? And second, accounting for possible breaks are the United States (U.S.) emissions of NOX and VOC TS or DS? Our empirical results show that the trend behavior of NOX and VOC emissions is substantially different. We find evidence of a five trend breaks in NOX and two breaks in VOC emissions. For each series, the predominant break occurs at the time the CAAA of 1970 were passed implying that this policy has been effective in reducing air pollution emissions. Allowing for a single break at the time the CAAA was passed, the unit root tests, however, show that NOX are DS whereas VOC emissions are TS. Allowing for multiple breaks allows us to reject DS for both series.