EI @ Haas Working Paper WP-186 Abstract

Meredith Fowlie, Stephen P. Holland and Erin T. Mansur, “What Do Emissions Markets Deliver and to Whom? Evidence from Southern California’s NOx Trading Program” (June 2009). (Revised version published in The American Economic Review,102(2), April 2012, pp. 1-29.) Full Paper


A perceived advantage of cap-and-trade programs over more prescriptive environmental regulation is that enhanced compliance flexibility and cost effectiveness can make more stringent emissions reductions politically feasible. However, increased compliance flexibility can also result in an inequitable distribution of pollution. We investigate these issues in the context of Southern California’s RECLAIM program. We match facilities in RECLAIM with similar California facilities also located in non-attainment areas. Our results indicate that emissions fell approximately 24 percent, on average, at RECLAIM facilities relative to our counterfactual. Furthermore, we find that observed changes in emissions do not vary significantly with neighborhood demographic characteristics.