Downwind and Out: The Strategic Dispersion of Power Plants and Their Pollution

In federalist systems, local governments may face incentives to export locally produced negative externalities. We empirically substantiate this externality-export strategy for air pollution using historical power-plant sitings, administrative borders, and prevailing wind directions. Using a simple, nonparametric test, we show that decision-makers disproportionately sited coal-fueled plants to reduce counties’/states’ downwind pollution exposure. Natural-gas-fueled plants—lower polluters—did not follow this strategy. We then illustrate the extreme exportability of coal plants’ pollution: within six hours, 50% of coal plants’ emissions leave their source states—and 99% depart source counties. These results highlight how local strategic responses challenge federalist systems.