A resource-based analysis of information technology, policy, and environmental performance

Title IV of the Clean Air Act (CAA) amendment of 1990 required electric utilities to install continuous emissions monitoring systems (CEMS)  – technology that provides continuous information on the emission of certain hazardous pollutants like sulfur dioxide (SO2) and nitrous oxide (NOX) that cause acid rain - in their power plants. The information gained from CEMS in power plants was used in an emissions trading program to curb the emission of these hazardous pollutants. This paper uses the Title IV as a case to provide a resource based view of how Information Systems (IS) may affect an organization’s environmental performance. The resource-based view (RBV) is rooted in the field of management strategy, and has been used to study the linkage between competitive advantages and firm resources.  According to the resource-based view, firms achieve sustainable competitive advantages when they possess resources that are valuable, rare, hard to imitate, and non-substitutable. Empirical evidence demonstrates how the use of IS technology such as the CEMS are helpful in changing a plant’s emission levels. Data from the EPA’s Emissions and Generation Resource Integrated Database (eGRID) as well as the U.S. Department of Energy’s Energy Information Administration (EIA) Database are used for the empirical analysis. Results suggest that the interaction of cap-and-trade policy with CEMS is crucial to reduce emission of hazardous pollutants thereby improving environmental performance. At the same time, results also indicate that installation of CEMS also provides complementary benefits to power plants in curbing carbon dioxide (CO2) emissions not regulated under Title IV of the 1990 amendment of the CAA.