By Aidan Acosta, Middlebury College
Cap-and-trade has been shown by previous studies to be at least as effective as prescriptive regulation at reducing air pollution. Because cap-and-trade is more flexible for facilities than control- based regulations, it has gained important political support. However, regulators must ensure that the dispersion of emissions that is dictated by the market is environmentally just in order for cap-and-trade to be a viable solution. I investigate the changes in dispersion patterns resulting from the implementation and operation of Southern California’s RECLAIM program between 1994 – 2010 using a difference-in-difference model. My results demonstrate that RECLAIM was equally effective as the counterfactual command- and-control regime. With regard to race, I find suggestive evidence that the program led to a reordering of emissions whereby Blacks benefitted, while Hispanics and other races lost out, relative to Whites. With regard to income, I find evidence that the lowest- income group benefitted, while the middle-income group lost out, relative to the highest income group.
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