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A mixed bag: assessment of market performance and firm trading behavior in the NOx RECLAIM program

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  • Thomas H. Klier
  • Richard H. Mattoon
  • Michael Ari Prager

Abstract

Tradable permit markets have become an increasingly popular tool to address environmental policy problems. This paper examines the performance of one particular emissions trading market, the Regional Clean Air Incentives Market (RECLAIM) that started operating in Southern California at the beginning of 1994. It first describes how the RECLAIM program is designed and then describes and evaluates the performance of the market by analyzing trading and price data of NOx emission credits. We find that a considerable number of trades have occurred in the market, however, we also find that many facilities are not significantly participating in the market. We conclude by focusing on the firm's perspective in order to attempt an explanation of trading behavior observed to date.

Suggested Citation

  • Thomas H. Klier & Richard H. Mattoon & Michael Ari Prager, 1996. "A mixed bag: assessment of market performance and firm trading behavior in the NOx RECLAIM program," Working Paper Series, Regional Economic Issues WP-96-12, Federal Reserve Bank of Chicago.
    • Handle: RePEc:fip:fedhre:wp-96-12
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    References listed on IDEAS

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    1. Thomas H. Klier & Richard H. Mattoon, 1994. "To trade or not to trade: who participates in RECLAIM?," Working Paper Series, Regional Economic Issues 94-11, Federal Reserve Bank of Chicago.
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    7. Atkinson, Scott & Tietenberg, Tom, 1991. "Market failure in incentive-based regulation: The case of emissions trading," Journal of Environmental Economics and Management, Elsevier, vol. 21(1), pages 17-31, July.
    8. Hahn, Robert W, 1989. "Economic Prescriptions for Environmental Problems: How the Patient Followed the Doctor's Orders," Journal of Economic Perspectives, American Economic Association, vol. 3(2), pages 95-114, Spring.
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    Cited by:

    1. Donald N. Dewees, 2001. "Emissions Trading: ERCs or Allowances?," Land Economics, University of Wisconsin Press, vol. 77(4), pages 513-526.
    2. Larson, Donald F. & Parks, Paul, 1999. "Risks, lessons learned, and secondary markets for greenhouse gas reductions," Policy Research Working Paper Series 2090, The World Bank.
    3. Burtraw, Dallas & Szambelan, Sarah Jo, 2009. "U.S. Emissions Trading Markets for SO2 and NOx," RFF Working Paper Series dp-09-40, Resources for the Future.
    4. Lata Gangadharan, 2004. "Analysis of prices in tradable emission markets: an empirical study of the regional clean air incentives market in Los Angeles," Applied Economics, Taylor & Francis Journals, vol. 36(14), pages 1569-1582.
    5. Reimund Schwarze & Peter Zapfel, 2000. "Sulfur Allowance Trading and the Regional Clean Air Incentives Market: A Comparative Design Analysis of two Major Cap-and-Trade Permit Programs?," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 17(3), pages 279-298, November.
    6. Meredith Fowlie & Jeffrey M. Perloff, 2013. "Distributing Pollution Rights in Cap-and-Trade Programs: Are Outcomes Independent of Allocation?," The Review of Economics and Statistics, MIT Press, vol. 95(5), pages 1640-1652, December.
    7. Meredith Fowlie & Stephen P. Holland & Erin T. Mansur, 2012. "What Do Emissions Markets Deliver and to Whom? Evidence from Southern California's NOx Trading Program," American Economic Review, American Economic Association, vol. 102(2), pages 965-993, April.
    8. Antonio M. Bento & Emeric Henry & Scott E. Lowe, 2013. "The Determinants of Credit Allocations in a Market-based Trading System: Evidence from the RECLAIM Program," The Review of Regional Studies, Southern Regional Science Association, vol. 43(1), pages 51-80, Summer.

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