Business Intelligence

What Do Emissions Markets Deliver And To Whom? Evidence From Southern California?s NOx Trading Program

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Executive Summary

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. The authors investigate these issues in the context of Southern California's RECLAIM program. They match facilities in RECLAIM with similar California facilities also located in non-attainment areas. The results indicate that emissions fell approximately 24 percent, on average, at RECLAIM facilities relative to the counterfactual. Furthermore, they find that observed changes in emissions do not vary significantly with neighborhood demographic characteristics.

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