When to Pollute, When to Abate? Intertemporal Permit Use in the Los Angeles NOx Market
AbstractWe study intertemporal trading of nitrogen oxides permits in Southern California’s RECLAIM program. We model RECLAIM’s distinct intertemporal features: two overlapping permit cycles and two overlapping compliance cycles. In the model, competitive equilibrium is cost-effective, and firms have an incentive to delay abatement. From 1994 to 2006, RECLAIM facilities traded intertemporally by using permits of the opposite cycle. We test two theoretical propositions—delayed abatement and trading across cycles—with a difference-in-differences estimator and show weak, though inconclusive, support of the theory. The theoretical and empirical results are relevant to cap-and-trade programs with potential for overlapping permit cycles.
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Bibliographic InfoArticle provided by University of Wisconsin Press in its journal Land Economics.
Volume (Year): 88 (2012)
Issue (Month): 2 ()
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Other versions of this item:
- Stephen P. Holland & Michael Moore, 2008. "When to Pollute, When to Abate? Intertemporal Permit Use in the Los Angeles NOx Market," NBER Working Papers 14254, National Bureau of Economic Research, Inc.
- Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
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