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Who Wins from Emissions Trading? Evidence from California

Corbett Grainger and Thanicha Ruangmas ()
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Thanicha Ruangmas: University of Wisconsin – Madison

Environmental & Resource Economics, 2018, vol. 71, issue 3, No 5, 703-727

Abstract: Abstract Researchers and environmental policy advocates have raised questions regarding the distributional impacts of emissions trading programs, a.k.a. “cap-and-trade”. While previous research has been careful to identify the causal effect of emissions trading on emissions reductions (Fowlie et al. in Am Econ Rev 102(2):965–993, 2012, hereafter FHM), we argue that existing estimates of differential impacts on demographic groups have relied on unrealistic assumptions regarding pollution dispersion. In this paper, we estimate the emissions reduction due to the RECLAIM cap-and-trade program in Southern California following the identification strategy of FHM, but we relax the assumption of uniform dispersion surrounding point sources. We model the transport of effluents using a state-of-the-science dispersion model to determine the areas impacted by emissions from each source. Importantly, conditional on race and ethnicity, we find that higher income areas receive larger reductions in pollution under cap-and-trade. Furthermore, conditional on income (or poverty rates), we find that Blacks benefit while Hispanics lose relative to whites under RECLAIM.

Keywords: Cap-and-trade; Emissions trading; Environmental justice; Distribution; Pollution dispersion (search for similar items in EconPapers)
Date: 2018
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DOI: 10.1007/s10640-017-0180-1

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