Distributing pollution rights in cap-and-trade programs: are outcomes independent of allocation?

Meredith Fowlie and Jeffrey Perloff

No 47002, CUDARE Working Papers from University of California, Berkeley, Department of Agricultural and Resource Economics

Abstract: According to the Coase theorem, if property rights to pollute are clearly established and emissions permit markets nearly eliminate transaction costs, the permit market equilibrium will be independent of how the permits are initially distributed among firms. Testing the independence of firms' permit allocations and emissions is difficult because of endogeneity and omitted variable bias. We exploit the random assignment of firms to different permit allocation cycles in Southern California's RECLAIM Program to test for a causal relationship between facility-level emissions and initial permit allocations. Our primary finding is that a null hypothesis of zero effect cannot be rejected.

Keywords: Environmental; Economics; and; Policy (search for similar items in EconPapers)
Pages: 43
Date: 2008-09
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Citations: View citations in EconPapers (8)

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Working Paper: Distributing Pollution Rights in Cap-and-Trade Programs: Are Outcomes Independent of Allocation? (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:ucbecw:47002

DOI: 10.22004/ag.econ.47002

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