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We use a hazard model to estimate the effect of environmental regulation on the diffusion of membrane cell production technology inthe chlorine manufacturing industry. We estimate the effect of regulation on both the adoption of the membrane technology atexisting plants and on the exit of existing plants using older technologies. We find that environmental regulation did affect thediffusion of the cleaner technology in the chlorine industry. However, it did so not by encouraging the adoption of membrane cells by existing facilities, but by reducing the demand for chlorine and hence encouraging the shutdown of facilities using theenvironmentally inferior options.