What Do Emissions Markets Deliver and to Whom?
Evidence from Southern California's NOx Trading Program

 

Meredith Fowlie, Stephen Holland, and Erin T. Mansur


American Economic Review, Volume 102, Issue 2, April 2012, pages 965-993.
AER data file and web appendix, April 2012.     Related Stata file titled “replacezip.do
Working Paper, March 2011.
NBER Working Paper 15082, June 2009.
SSRN abstract number 1416787, June 2009.
UCEI CSEM Working Paper-186, June 2009.
Previously titled: “Evaluating Emissions Trading Using a Nearest (Polluting) Neighbor Estimator”

Abstract:

 

An advantage of cap-and-trade programs over more prescriptive environmental regulation is that compliance flexibility and cost effectiveness can make more stringent emissions reductions politically feasible. However, when markets (versus regulators) determine where emissions occur, it becomes more difficult to assure that mandated emissions reductions are equitably achieved. We investigate these issues in the context of Southern California's RECLAIM program by matching facilities in RECLAIM with similar California facilities also in non-attainment areas. Our results indicate that average emissions fell 20 percent at RECLAIM facilities relative to our counterfactual. Furthermore, observed changes in emissions do not vary significantly with neighborhood demographic characteristics.