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Do Environmental Markets Cause Environmental Injustice? Evidence from California's Carbon Market

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  • Danae Hernandez-Cortes
  • Kyle C. Meng

Abstract

Market-based environmental policies are widely adopted on the basis of allocative efficiency. However, there is growing concern that market-induced spatial reallocation of pollution could widen existing pollution concentration gaps between disadvantaged and other communities. We examine how this \environmental justice" (EJ) gap changed following the 2013 introduction of California's carbon market, the world's second largest and the most subjected to EJ critiques. We estimate that the program lowered GHG, PM2:5, PM10, and NOx emissions by 3-9% annually between 2012-2017 for sample industrial facilities regulated only by the carbon market. Using a pollution dispersal model to characterize resulting spatial changes in pollution concentrations, we find the program caused EJ gaps in PM2:5, PM10, and NOx from these facilities to narrow by 6-10% annually. We demonstrate that explicit modeling of pollution dispersal is critical for detecting these results.

Suggested Citation

  • Danae Hernandez-Cortes & Kyle C. Meng, 2020. "Do Environmental Markets Cause Environmental Injustice? Evidence from California's Carbon Market," NBER Working Papers 27205, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:27205
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    Cited by:

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    2. Faiella, Ivan & Lavecchia, Luciano & Michelangeli, Valentina & Mistretta, Alessandro, 2022. "A climate stress test on the financial vulnerability of Italian households and firms," Journal of Policy Modeling, Elsevier, vol. 44(2), pages 396-417.
    3. Josh Blonz & Brigitte Roth Tran & Erin E. Troland, 2023. "The Canary in the Coal Decline: Appalachian Household Finance and the Transition from Fossil Fuels," NBER Working Papers 31072, National Bureau of Economic Research, Inc.
    4. Ivan Faiella & Luciano Lavecchia, 2021. "Households' energy demand and the effects of carbon pricing in Italy," Questioni di Economia e Finanza (Occasional Papers) 614, Bank of Italy, Economic Research and International Relations Area.
    5. Kakuho Furukawa & Hibiki Ichiue & Noriyuki Shiraki, 2020. "How Does Climate Change Interact with the Financial System? A Survey," Bank of Japan Working Paper Series 20-E-8, Bank of Japan.
    6. Mariia Murasheva & Maria A. Cunha-e-Sa, 2022. "The impact of industrial pollution exposure on hospital admissions: Evidence from a cement plant in Russia," Nova SBE Working Paper Series wp652, Universidade Nova de Lisboa, Nova School of Business and Economics.
    7. Moritz A. Drupp & Ulrike Kornek & Jasper N. Meya & Lutz Sager, 2021. "Inequality and the Environment: The Economics of a Two-Headed Hydra," CESifo Working Paper Series 9447, CESifo.
    8. Bruno, Ellen & Hadachek, Jeffrey & Hagerty, Nick & Jessoe, Katrina K., 2022. "Unintended costs of climate change adaption: Agricultural wells and access to drinking water," 2022 Annual Meeting, July 31-August 2, Anaheim, California 322241, Agricultural and Applied Economics Association.
    9. Han, Xianru, 2023. "The Distributional Effects of Tighter Regulations: New Evidence from the Sugarcane Burning in Florida," 2023 Annual Meeting, July 23-25, Washington D.C. 335926, Agricultural and Applied Economics Association.

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    More about this item

    JEL classification:

    • H4 - Public Economics - - Publicly Provided Goods
    • I14 - Health, Education, and Welfare - - Health - - - Health and Inequality
    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects
    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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