UNIVERSITY PARK, Pa. — The Clean Air Act of 1970 helped standardize pollution limits at the national level, but individual politicians can wield significant influence over the rates of industrial emissions in their districts, according to a new analysis conducted by a multi-institutional team that includes researchers at Penn State.
Industrial plants located in districts represented by a narrowly elected Democrat have approximately 30% lower emissions on average than those located in districts that are narrowly won by a Republican, according to the researchers, who assessed nearly 40,000 industrial plants and more than 5,000 U.S. House elections over 25 years. They also found that firms with plants in multiple districts reallocated emissions away from areas represented by Democrats. This reallocation was associated with potential financial impacts for firms as well as public health concerns for local communities.
The study was published in the September print edition of The Review of Financial Studies .
“Firms have a lot more control over their emissions than we think,” said study co-author Stefan Lewellen, assistant professor of finance at Penn State’s Smeal College of Business. “This research suggests that even something as small as a local representative using some soft power to intervene causes those firms to turn up or turn down the pollution dial pretty significantly.”
Industrial plants have several levers they can theoretically adjust to reduce their emissions, Lewellen said, including investing in abatement technologies like wet scrubbers — which remove pollutants directly from contaminated gas before release — increasing their postproduction treatment or simply lowering their production. Indeed, the researchers found a 47% higher investment in abatement technologies in Democratic districts as well as higher rates of postproduction treatment and recycling, though there were no major differences in plant productivity.
The researchers examined data from 37,368 industrial plants and 5,304 U.S. House elections between 1991 and 2016, with their core analysis focused on a smaller subset of close elections. From these close elections, the researchers said they could isolate the impacts of a representative’s personal preferences from the pressures of voters in their district, since the overall environmental preferences of voters in a district should be largely similar regardless of the winning candidate’s party affiliation when the margin of victory is small.
Congressional representatives typically do not wield much direct legislative influence over their districts, and most enforcement of Environmental Protection Agency regulations happens at the state and local levels — but politicians still hold power, the researchers said.
“One of the things that's tricky about political soft power is that there's never going to be a smoking gun,” Lewellen said. “Politicians could be leaning on firms by going to state regulators and pushing for more inspections and tighter enforcement — or fewer inspections and less enforcement. You're never going to observe the phone call or the coffee meeting, so you have to look around the edges.”
In addition, pollution permits are often more complicated than dictating a flat cap on emissions over the course of a year, Lewellen said. Pollution limits can be determined by the day, hour or even minute and can change based on a variety of factors like temperature, making inspections a key tool for regulators to catch irregularities in a system that otherwise offers some gray area for firms to overpollute.
According to the team’s analysis, close Democratic wins were associated with around 34% higher inspections and roughly 30% more enforcement actions, most of which were informal actions like cease-and-desist letters as opposed to more severe formal actions like fines or investigations.
“Companies really dislike being given enforcement fines because that tends to be very public and very negative publicity for the firm,” Lewellen explained, noting that firms will often comply and reduce emissions, but only enough to avoid harsher penalties.
The researchers also found that emissions were higher at a plant when its parent firm’s other facilities were in districts with Democratic representation, suggesting that firms with plants in multiple districts reallocate emissions away from Democratic areas in an attempt to recoup their higher investment costs.
However, this reallocation, the researchers note, was often imperfect. In fact, raising a firm’s share of Democratic representatives from zero to one also raised their cost of goods sold by about 4% and lowered their market-to-book ratio — a stock valuation metric that acts as a proxy for firm value — by a similar degree.
Pulling data from the Center for Medicare and Medicaid Services, the researchers also explored how differing rates of pollution impacted public health within these districts. By breaking districts down into smaller areas based on three-digit ZIP codes — which correspond to metropolitan areas or regions within states that also act as typical service areas for hospitals — they compared respiratory illness rates and associated healthcare costs in areas with a high number of plants and those with a low number of plants.
“Respiratory illnesses are always going to be higher in areas with lots of plants, but we can look to see whether that difference changes after, say, a Democrat is elected,” Lewellen said. “That way, we’re isolating the effects of the pollution from the other differences between the areas.”
In areas with high numbers of plants, there was a 7% to 8% higher incidence of respiratory illnesses and 7% to 13% higher healthcare costs for respiratory-related hospital visits in districts represented by a Republican versus a Democrat, the researchers found. They estimated that each Democrat-to-Republican House seat transition is associated with 67 additional hospital visits costing around $628,000 per year.
Lewellen said these results speak to a larger implication about the role of political representatives in the American democratic system.
“Politicians' preferences are just as important as the laws that are passed in deciding what happens in their districts,” he said.
A complete list of authors can be found in the paper .
Review of Financial Studies
Data/statistical analysis
Smokestacks and the Swamp
1-Sep-2026